Profitable ETF Trading Strategies - Manage Your Emotional Bank Account

[Miguel Taylor]

Managing your intraday trades when the market is open can be a very
nerve-racking experience. Sometimes there's so much going on that it's
hard to keep track of what's important. Other times it seems like
you're watching paint dry and nothing is going on in, and you can feel
your nervous energy building up in an urge to do something.  
This sense of market condition affects your trading state of mind, as
does the sum total of your emotional responses to the results of the
trades that you have taken so far that day.   It is as if you
have an emotional bank account that tracks the debit and credit of
emotional responses to the results of the day. After a couple of
losing trades in a row, it would be natural for you to start
experiencing a little bit of anxiety with respect to the remaining
positions at the open in order to gain back some of that positive
feeling of momentum and profits.   If you can feel your emotional
state varying as a consequence of the trade results for that day, then
it is a good idea for you to reinforce your trading practice which
gets you to the "zero state" quickly and easily as soon as you can
sense your emotional state changing.   If you are an intraday
trader who is relying upon tight stops catching key turning points in
the market to create high reward to risk ratio trades, however, you
must come to expect a series of losing trades in a row with minor
losses in order to be positioned to catch the winning trade which buys
them all back and then some when your trade takes off.   If you
have unreasonable expectations about your winning rate, you may find
yourself becoming depressed by a losing streak that should be
considered normal, usual and expected. Knowing your system and the way
it performs will help you resist the emotional drain of losing trades
that are within a normal distribution.   In addition, trading
techniques like getting to "no lose" condition quickly, staying in
tune with market cycles intraday,  and being ruthless about
banking some wins when you have them in hand can help you develop the
emotional thick skin to be able to manage trades that go against you
in a professional manner.   If you find yourself reaching for the
next trade, or getting nervous about looking for the next opportunity
to get you back to your winning ways, then you have an indication that
you are not trading from emotionally balanced, stable and secure base.
  The more your trading relies upon your discretion and judgment
in the moment, which is a common feature of intraday trading, the more
important it is for you to monitor your intraday emotions.   It's
a good idea to include your emotional state in the evaluation
checklist you use on each  trade, so that you can make sure that
you're coming from a place of emotional, psychological and
intellectual try and you enter a new trade rather than as a response
to a decaying emotional state.   Monitor that emotional bank
account traders!

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