Winning traders are extremely disciplined. They astutely study the markets, devise a trading plan, and follow it. They control their impulse to abandon their plans prematurely, and they don’t allow emotions, such as fear and greed, to influence their trading decisions. In the trading profession, emotions often get a bad rap, however. There are critical moments of investing when it’s vital to control your emotions, but there are also times when you can let your emotions run wild.


Trading can be broken down into two basic phases: Planning and Execution. In the planning phase, a trader creatively searches for trading ideas and develops a viable trading plan. During the planning phase, you can feel free to experience a variety of emotions. When you execute your trading plan, though, it’s essential to control your emotions and impulses. Once you plan the trade, you must trade the plan in order to take home profits.

During the planning stage, your goal is to find new trading strategies. It’s a creative process, and to find them, you cannot be closed off and rigid. Not only is it all right to allow your emotions to guide you, but it may also be necessary. It’s all right to psych yourself up. Get excited and enthusiastic. You need the energy to do the homework to discover an innovative idea. Depending on your trading style, you need the energy to backtest, scan charts, or read financial reports. Go ahead and tell yourself encouraging thoughts, such as “I’m a creative person. If I let my imagination run freely, I’ll think of a brilliant idea.” When you’re in the creative planning stage, you can think emotionally.

As you search for ideas, feel free to impulsively switch from one idea to the next. Combine and recombine ideas. What’s the harm? You’re trying to find a new idea. At some point in the creative process, you might even want to show some self-reproach or even paranoia. You might want to play Devil’s Advocate as you try to figure out what might go wrong. In the planning stage, it’s useful to defensively think of every potential adverse event that may ruin your trading plan. A little scepticism can only help matters during the planning phase.

At some point during the planning phase, though, you must stop searching and deliberating and decide on a plan. You must specify when to enter and when to exit, and determine the indicators that will allow you to monitor the success of your trading plan. Once you have a plan devised, your emotions and impulses must be controlled. At some point, you must stop thinking emotionally, and move into a rational state of mind. You must carefully enter as planned, monitor the market action, and effortlessly exit should the markets go against you, or wait for your plan to come to fruition.

Emotions aren’t always a distraction while trading. There is a time and place for everything, and emotions can motivate us to develop creative ideas. But once you move from the planning to the execution stage, it’s essential to trade with discipline. The disciplined trader is the winning trader.

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