How To Trade Objectively Without Emotional Influence

Disclaimer: financial information is not financial advice. This post is for informational purposes only.

Emotions rule and sway the stock market. Similarly in the way that emotions are volatile, in that, they fluctuate and change, so does the stock market fluctuate.

Many traders succumb to buying and selling stocks due to emotional influence. The three dominant emotions that influence a trader's decision making are greed, fear, and hope.

Greed

Greed is not good for a trader to possess.

If a trader becomes greedy, and allows that emotion to dictate the status of their trading positions, then they are no longer trading objectively, but rather, emotionally.

The greed emotion becomes problematic when, for example, is in a winning position, but keeps the position open longer than they should.

A trader needs to define when to take profits and stick to closing the trade once a predetermined profit margin is met. Because what you don't want to have happen is where you are winning, but you hold too long, only for the trade to go back down and then you lose.

Fear

Fear is not necessarily as bad of an emotion, as greed, for a trader to possess, in the sense that, if you are afraid of placing a trade, you then cannot lose money on a bad trade.

A trader must be able to open and exit a position without fear preventing them from acting on objective entry and exit signals.

Hope

Hope is when a trader is essentially gambling and merely hoping for the best, that things just work out some how in the markets, in their favor.

If a trader is deciding whether to enter or exit a position, and a question like, "I hope this goes up (or down)," manifests in their mind, then that is not likely a good decision making process, one that isn't objective, anyway.

So if your trade relies on "hope" in order to be right and win in the market, it is a dangerous and risky game, indeed!

Objectivity Over Subjectivity

Emotions are inherently subjective. Your trades, typically, should be void of emotional influence, whether those emotions are your own, or they are the feelings and opinions of others.

Being objective in the markets is the only way you to trade in a predictable fashion.

When the markets are volatile, it becomes less predictable, as it swings up and down, in every direction. Similarly to unpredictable, collective mass of emotions that traders possess.

To be objective in the market, is to trade with reason, rules, criteria, and signals – rather than emotions.

Conquer Your Trading Emotions

The best way to trade objectively, without emotional influence, is to plan your trade and trade your plan.

When you plan out your trades, before you open or close them, then you are able to make objective decisions without the chaotic market noise and fluctuations or prices and opinions influencing you one way or the other.

Many traders are ruled by their emotions in the market because they are trading "on the fly", there is no trading plan, they are "fighting" the market and their emotions.

Conclusion

The stock market is volatile and ever fluctuating, similarly to the collective mass of traders and their emotions.

It is better to trade objectively, without the three emotions that drive the markets:

• Greed
• Fear
• Hope

Emotions are natural, they are what make us human, but they work against us in the stock market.

Trade objectively by planning your trade and trading your plan.