The Ultimate Guide To Emotions in Trading: Part I

BY Chris Andreou

|December 1, 2020

If you’ve ever opened a single trade, you’ll know how easy it is to let your emotions carry you away, stomp on your dreams, and rip your soul to shreds.

When money is on the line, our own instinct can get in our way. This is particularly true for day traders, who are trading under immense pressure for much of the day.

Pretending you’re one of the 1% of people in the world who never let their emotions get in the way of a good trade is futile. Instead, you have to acknowledge and confront the demons of your trading psychology in order to learn how to keep them at bay.

Three key emotions come into play when we make bad decisions: greed, fear and the impulse for revenge.

The dangers of being a greedy trader

You’re here to make money, plain and simple. And you’re risking a portion of your own money to make it.

But you should always remember: there’s a difference between a measured risk to reward ratio, and risking it all.

Greedy traders (that would be me and you) are usually winning traders who are unwilling to accept that things won’t keep getting better. When greed takes over, you find it hard to accept that it’s time to capture your profits and call it a day. Instead, you keep believing you haven’t achieved the “maximum” yet, and hanging on until it’s far, far too late.

The simple key here is to learn to accept defeat. Accept moderate profits instead of persisting for unattainable profits. Repeat x 100. Now you’re forming the correct sort of habit – never, ever look back.

Tackle your fear

No matter how long you’ve been trading, it’s hard to completely overcome the fear of losing all your money. But, this irrational fear can lead to impulsive and irrational behaviour that will become a self-fulfilling prophecy.

It leads to scenarios in which you settle all your open positions out of fear that they will soon plummet in value. Once you close your positions, you quickly realise that you were wrong and that you left a lot of money on the table.

The worst thing you can do at this point is try to settle the score.

Resisting the urge for revenge

The concept of revenge on yourself is a little weird, let’s admit. Getting revenge on an abstract concept such as “markets” is equally weird. But that’s exactly what is happening. You’ll show them this time.

In the world of behavioural science, this is called the “sunk cost fallacy”. People will go to extreme lengths to recoup losses they once owned.

It’s something you view as rightfully yours. The truth however, is that once you’ve lost it, it’s not yours any more. Instead of obsessing about making amends, move on with a new, fresh, clean point of view that has nothing to do with anything you’ve just lost. The best way to do this is to take a little break and let yourself step away from the markets for a while. As long as it takes until you’re sure you’re “over it”.

How to deal with emotions.

Now you know that you need to look out for fear, greed and revenge when trading. But how exactly do you go about eradicating these evils?

Create a plan and stick to it.

It’s really that simple. If you stick to a plan, you are following rules. When you deviate from those rules, you’re not sticking to a plan.

Establish a concrete set of rules in advance. If you’ve already decided how to react under every situation, all you need to do in the moment is follow through on that plan, no ands, ifs or buts.

Greed, fear and revenge might seem like separate battles to be won, but in reality they’re all actually the same problem – the lack-of-plan problem. By mapping out the risks you’re prepared to take, you can stop these emotions from taking over.

To create a solid plan, you’ll need to decide when you want to enter and exit positions.

Entering and exiting a trade are the most important decisions in trading. To decide on these strategies, you’ll need to assess how much risk you’re willing to take.

Risk-averse traders who become fearful easily should set conservative stop-loss limits. Whereas if you’re a risk-taker you can give yourself a little room for maneuver here.

Setting a take-profit order is also key to removing emotion from the equation. Decide beforehand how much you think it’s realistic to earn from a trade, and don’t budge from that limit.

Do your research

Another factor in removing de-emphasising the effect emotions can have is to do your research thoroughly. The better you understand the reason why you entered a trade, the less likely you’ll be to crumble under pressure at the slightest hint of trouble.

Read the latest news, get some technical analysis advice, and speak with other traders or your TIOmarkets account manager to help you fully understand your choices.


Getting your emotions under control with a plan isn’t only for traders who are trying to make amends for past transgressions. It’s necessary for all traders of every experience level.

It’s not something you can achieve overnight, but with experience, it’s something you can undoubtedly accomplish. You’ll probably experience some setbacks along the way, but that’s all part of experiencing the emotions and learning to get things under control.

Here’s to a less emotional, more rewarding week of trading.

At TIOmarkets, we have unrivalled tools to help traders manage risk. That includes TIOshield, a great risk-management tool that allows you to cancel any trade if you change your mind within 60 minutes and get all your margin back.

Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & OFAC. The Company holds the right to alter the aforementioned list of countries at its own discretion.

Chris Andreou

Experienced independent trader

24/7 Live Chat

Trade responsibly: CFDs are complex instruments and come with a high risk of losing all your invested capital due to leverage.