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This week on Money & Investing, Mitch Olarenshaw and I discuss how emotions can affect your trading results, and what you can do to build discipline and stay consistent in the market.
1. Recognise the role of emotions
Fear and greed are common drivers for many traders. Letting emotions take control often leads to poor decisions like panic selling or buying too late.
Keep emotions out of your process.
2. Don’t try to time the market
Trying to pick the top or bottom rarely works. Missing just a few key rebound days can cost you most of your yearly gains.
Staying invested with a clear plan usually works better than trying to time it perfectly.
3. Use rule-based entries and exits
Defined entry and exit levels help take emotion out of trading.
Limit orders allow you to act on decisions made in advance, without the pressure of live market conditions.
4. Watch for biases
Overconfidence, negativity bias, and confirmation bias can distort your judgment.
Stay open to both the upside and downside and be aware of personal blind spots when assessing trades.
5. Focus on technicals over headlines
Headlines are often emotional and misleading.
Use chart patterns, Relative Strength Index (RSI) Indicator, and volume flow to assess what the market is doing – info based on facts, not fear.
6. Protect profits in strong markets
The best time to think about risk is when conditions are good.
Using profits to buy protective puts can help lock in gains and reduce downside exposure.
7. Keep a trading journal
Journaling helps you review results, thoughts and emotions. Over time, this builds insight and supports better decision-making.
8. Prepare ahead of time
Decisions made ahead of time are more objective.
Set your buy and sell levels early to avoid second-guessing or reacting emotionally.
9. Stay disciplined
Pullbacks are part of investing.
Selling during a dip can lock in losses and lead to missed opportunities. Stick to your strategy and think long term.
10. Build self-awareness
Emotional discipline is one of the most important skills. Recognise your habits and build a plan that helps remove emotion from your trades.
For more Info about Money and Investing you can go to the podcast; The Wealth Playbook: Your Ultimate Guide to Financial Security; and, The Wealth Playbook by Andrew Baxter – Audiobook which is on Audible.
Disclaimer: Wealth Magnet Pty Ltd (ABN 52 618 868 830) trading as Australian Investment Education is a Corporate Authorised Representative (CAR no. 1255231) of Grange Financial Services Pty Ltd (AFSL No. 488609).
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
