How to Conquer Emotions while Trading – Part 3

Welcome to part- III, the final part of HOW TO CONQUER EMOTIONS WHILE TRADING.

We ended the second part with three important points:

1. Why people who rush into trades are favourite prey for whales
2. Why higher time frame is important
3. Why you should always stick to your plan

These are very basic things and most traders are aware of them but when it comes to implanting them, they lack.

Around 80% of traders quit trading within the first two years, and the reason is, they don’t focus on these basic principles.

1. Why people who rush in the trade are favourite prey

People without a proper trade plan are easiest to trap and favourite because they are the ones who provide liquidity to whales. They don’t have any exit strategy. When they see the price breaking out, they think they will miss a major move if they don’t take the trade. So they decide to enter the trade without any risk management. Whales take advantage of this by fluctuating the price, triggering emotions that force people to make hasty decisions like panic selling or panic buying.

2. Why you should stick to your plan?

Let’s understand this with two example-

(I) Imagine ETH breaks out of a resistance zone. So you planned a long trade, considering all the factors and decided to open the trade on the retest.

But then, you see that price showing too much strength and keeps rising. You start to worry and think, “What if the price continues to pump without retesting the level, leaving me behind?” Your ‘Fear of missing out’ overrides your discipline and you decide to enter the trade at market price. As soon as you do, the price reverses and hits your stop loss.

After hitting your stop loss, the price moves exactly as you planned initially. But now you are already out of the trade, left with a loss.

(II) Let’s discuss another common mistake most new traders make.
Every good trader, after doing a lot of extreme research and considering all the factors, develops a bias.

For example, after a rigorous analysis of ADA’s price action, volume, fundamentals and ADA/ BTC pair, KingTrader43968539 comes to a conclusion that ADA will go up. He plans a long trade and sets a limit entry. While waiting for the price to reach his entry point, he decides to scroll through Twitter. As soon as he opens twitter, he sees a tweet from legendary trader @TraderAlphaMomHunter69, mentioning that he has shorted SOL as BTC looks weak and SOL might dump hard.

Our trader, KingTrader43968539 throws all his good research into garbage and decides to ride along with @TraderAlphaMomHunter69.

The Market pumps leaving KingTrader43968539 in huge loss. @TraderAlphaMomHunter69 tweets again, saying, Market is choppy right now, “I am not opening any new trades for now as price is too volatile and manipulative.”

KingTrader43968539 faces big losses in the trade. He decides to check his ADA trade which he didn’t take. He is surprised to see that his ADA trade went exactly as he had planned.

What exactly happened In both (I) and (II) examples?

“The price did follow your plan but you didn’t .”

3. Why higher time frame is important

There is no single “best” time frame for trading. It varies based on an individual’s lifestyle and personality.

Choosing a time frame is crucial. Some traders find success with short time frames like 15 minutes, while some prefer higher time frames. It all depends on your patience level and personality.

If you are comfortable monitoring the price frequently then you can trade lower time frame. I personally prefer trading the 4H time frame mostly.

If you are a beginner and having trouble, I would suggest reducing your trade size and focusing on higher time frames as it has less manipulation and volatility. In higher time frames, price respects support and resistance more and follows basic trading patterns.

As you practise more, you’ll begin to realize which time frame is suitable for you based on your daily lifestyle and mindset. After some time, you will develop your own trading style.

Once you pass the basic trading barriers, you should focus on smart trading.

Here’s few thing you can work on:

Preserve your capital

Many traders experience this in the beginning: they win 4-5 trades in a row but then lose it all in a single trade.

That’s because as soon as you lose discipline and decide to become a gambler instead of a trader, exchanges are going to take their money back that you won by planning and executing your trades smartly.

Always set a fixed amount to risk and stick to it. With consistency, you will make profit.

The average win rate of most profitable traders is 50-55%. So how do they make the profit?

By winning big and losing small

They preserve their capital. Most of the traders calculate the potential profit they could make when the trade goes well, but only few consider the opposite scenario.

Before taking the trade, always consider the worst outcome and then decide your amount accordingly. For example, imagine BTC dumps heavily and everyone starts planning long trades with big amounts as reversal is likely after a significant drop.

This is the best case scenario, but what is the worst one?

What if whales decide to dump the price further to liquidate all people who opened big long positions, thinking similarly?

Once you start taking this into account, you will allocate your amount more wisely.

Relying Less on Indicators and More on Price Action

Once you start getting the hang of the market, try to become more reliable on price action. Because most indicators are lagging and fail to reflect real-time price data accurately. Price action provides immediate and direct reflection of what is happening in the market. By observing it, you’re seeing the collective behaviour of all market participants. Indicators, on the other hand, are often lagging and can miss real-time shifts in momentum or sentiment.

Before finishing our blog, I just want to add one more thing. Sometimes we lose a trade and then see big PNL screenshots from many people on social media. So we become upset and think that “I’m the only one who couldn’t predict this market move while everyone made a big profit.” Don’t be discouraged by this; because if everyone made profit then it was a typical market move, and pro traders don’t get upset when they miss a normal move.

Because-

Thank you legends.