Emotional Trading Can Cost You; Here's How Global Broker Octa Says Traders Can Keep Those Feelings At Bay

Keeping emotions out of the trade is easier said than done, especially when your investment is going south. But left unchecked, emotion can cost you profits. This is particularly true in the Forex market, which often thrives on volatility, taking advantage of short-term movements in global currencies. Octa, the global broker serving Southeast Asia, has seen what emotional trading can do to a portfolio. That's why the trading firm encourages all traders to keep emotions at bay. Here's how Octa advocates you do it. 

Six Emotions To Look Out For

Emotional trading is triggered by different feelings, but the outcome is usually the same: selling low and buying high. You hang on too long or get out too quickly. Or you don't execute the trade at all. Understanding which of the following emotions triggers you can help stop them in their tracks.  

1. Fear 

Fear is a big and costly emotion. It can show up a lot when trading currencies, causing many mistakes. If it’s a fear of losing, you may end up hanging on long after you should have exited the position. If it's a fear of giving back gains, it may cause you to cash out too early. You may not execute it at all or chase an investment out of fear of missing out. 

How to overcome it: Create a trading plan that is well thought out with guardrails in place to limit losses and then stick to it. Define how much risk you can tolerate and backtest your idea. 

2.  Greed 

Greed is a big motivator for many traders, but sometimes, too much of it can harm you. It can lead to excessive trading or cause you to hold on to a trade for too long. Either way, you end up losing profits. 

How to overcome it: Don't chase trades, take profits in increments, and limit your risk. 

3. Overconfidence

Maybe you had a winning streak or haven't lost money in a while, but ultimately you will, and if you don't accept that, overconfidence can cost you. Especially if it leads you to trust your gut or intuition more than facts and solid analysis or if you develop an unwillingness to adjust.

How to overcome it: Flexibility is the key to success, and overconfident traders may lack it.  The most resilient traders know how to navigate the good and bad times. They are willing to adjust their risk management strategies, take advantage of newfound volatility and accept that their call may have been wrong. To overcome confidence bias, it’s important to seek out diverse options, continue to research and learn, regularly check yourself to ensure your beliefs and opinions are steeped in fact and focus on risk management more than maximizing returns. 

To learn how Octa helps traders keep emotions at bay, click here. 

4. Anxiety

If your trade is well thought out and within your risk tolerance, it shouldn’t cause anxiety or stress. If it does, it’s a telltale sign you shouldn't be in the trade. 

How to overcome it: It’s a feeling you can easily forget if your trade is a success, which is why Octa recommends keeping a journal of your trades. Note if a trade made you feel anxious and why. That can serve as a red flag in the future. 

5. Frustration 

It’s easy to feel frustrated when your trade doesn't play out as planned. Acting on that emotion can lead you astray from your trading plan and cause you to make impulsive decisions. 

How to overcome it: Give it a look over to see if there are any real-time adjustments you can make. Using a demo account may also prove beneficial. Take Octa's free demo account, for example; it enables traders to experience real-time, real-life trading without risk or frustration. 

6. Herd mentality

Following the herd is only as good as the leader. You may end up entering or exiting a trade because of what others are doing instead of following your research and analysis. If it’s a success, great, but if it backfires, you and the herd could be on the hook for losses. That's not to say you should bury your head in the sand and ignore what others are doing. Hindsight is 20/20 and if you can learn from the mistakes made before you, the better off you'll be. 

How to overcome it: Stop blindly following what other traders are doing and start relying on the work you put into researching the trade. Use things like Octa's Space, which provides ideas from experts and tools for traders who want to learn from the experiences of others, to test out your strategies. 

AI For The Assist 

Beyond controlling your emotions on your own, AI is one tool that can potentially provide assistance, particularly in cryptocurrency trading where it is being used to provide data-driven decisions. AI algorithms analyze reams of data to spot trends, make predictions and execute trades without human intervention. The models are ever-evolving and adapt to what is going on in the marketplace at any given moment. Octa's OctaVision AI tool is an example of that. It provides traders with access to AI-driven data and analysis. Traders can more easily identify potential opportunities with OctaVision, the company says. 

Emotions can be a trader's Kryptonite. Keeping them at bay is paramount. Trading firms like Octa can help traders do that thanks to its customer service and AI-driven tools.  To learn more about Octa's broad offering of tools and technology, click here. 

Featured photo by Ishant Mishra on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.