How to Manage Emotions in ETF Trading

In the ETF industry, emotions play an important role in determining your success or failure. Overcoming psychological problems like greed and fear can relieve you from stress. In addition, this can bring about significant changes in your trading career. Many beginners fall victim to their emotions and consequently lose all their investment. This problem is not just prevalent among beginners; you may find that many intermediate and advanced investors also have this issue.

Why should you control emotion in ETF trading?

Controlling emotion in the ETF industry (much like any other market you decide to trade) significantly affects the psychology and trading style of a newbie. For example, when a novice adheres to his strategies, he/she doesn’t want to take any other steps. But when he starts taking action based on feelings, several problems arise and the trade begins neglecting the risk to reward ratio, stop-loss limit, and other money management tips. All these issues can ruin the trading career in one blow. Therefore, we suggest that you control your emotions at any cost.

Every beginner will notice that professionals never make decisions based on their predictions. They first analyze the market accurately and confirm the next direction. Only after then do they enter trades. If an investor cares about hard-earned money, he/she should be careful like the professionals.

Most common emotional troubles that traders experience

These are the three most prevalent problems beginners face.

1. Nervousness or fear

   This is a common challenge among the very beginners and the individuals who have lost several trades. Many newbies don’t have the confidence to enter their first deals because they take the market too seriously. In contrast, people who have lost a few trades become scared of losing more, and as a result, they don’t want to enter the next trade. Both of these types of traders miss a lot of opportunities to make profits. In order to trade ETFs, you can’t be afraid to make the right decision. Be bold like the elite traders in Hong Kong and accept managed losses.

2. Excitement

   Excitement is another issue that is regarded as one of the obstacles when trading the ETF market. Excitement is like that great feeling that an investor gets after a fair trade. Sometimes, because of this, eager novices rush into another trade without analyzing the approaching flow of the asset.

3. Overconfidence or greed

   This attitude is common among greedy traders and people who want to get rich in a night. Overconfidence is prevalent among those who have won a series of deals on the platform and now think that they have become trading experts. As such, these traders enter into the trades taking a greater risk and don’t want to follow the business plan. Greed and overconfidence can completely ruin the account of a trader.

Tips on controlling your emotions during trading

These are the three tips for controlling your emotions in the CFD industry.

1. Stick to the strategy

   This is the first tip that we are providing you. Every ETF trader will recommend you sticking to the plan because every strategy is developed based on an alternative way. Adhering to the process will never allow a trader to make any faulty decisions that can ruin their investment.

2. Enter into trading after analysis

   You should enter the market only after conducting a good analysis. You may know that there are two kinds of market analysis – fundamental and technical. No matter what type of analysis you prefer, make sure that you do it before entering the industry.

3. Reduce the size of your trade

   This is important advice for greedy traders. If you want to overcome greed, then it is better to reduce the size of the lot or volume of your trade. A bigger lot size can indeed beget greater profits, but at the same time, it can result in greater loss during a bearish flow.