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Trading Tilt
http://www.netpicks.com/trading-tilt/
Many will have heard of tilt in poker,
but tilt in trading is probably far more
devastating if not handled well and it
can take a long time to recover from
the consequences.
Trading tilt is a phenomenon which
tends to affect traders who are more
active in the markets - those who take
multiple intraday trades.
This is because a trader has the ability
to enter the market at any desired
moment and so there's very little time
to disrupt the tilt process once it
begins or for strong emotions to fade
away.
Trading tilt is when a trader acts in a
heightened emotional state. It's when
you're unable or unwilling to control
your actions in a logical manner and
are driven purely by emotions.
It's generally recognized as an active
process, where a trader is compelled
to take poorly thought out or rash
trades.
But it can also be argued that there's a
passive type of tilt, where emotions
prevent you from taking trades at all.
I'm of the opinion that true tilt is
about not being able to control your
actions. This is what I want to focus on
here.
To get a better idea of tilt, think of a
trading scenario where the internal
conversation goes something like: -
"Oh man - not again! I don't believe it!
Well I'll show you!" and then you take
a poor or rash trade out of anger or
frustration.
Trading becomes aggressive and all
respect for risk goes out the window.
If you don't recognize this, think about
an argument you've had in the past
with someone you care about.
I'm confident that most people will
have at least once said something in
anger, which they truly did not mean
and would take back if they could. But
in the heat of the moment, they were
unable to think logically and were
driven by strong emotions.
Going on tilt may or may not have an
immediate impact on a trader. In fact,
it's probably worse if the trader makes
money in the beginning, irrespective
of this type of trading.
If they do, bad habits start to creep in
and even worse, strong emotional
responses to certain situations
become second nature.
Financially, the fallout from tilt can
have a huge impact on the expectancy
of a strategy. It only takes a few
blowout trades to really skew
performance.
When this happens, it also leads to
traders starting to snatch at their
winners too. So the effect is doubled
by taking smaller winners and larger
losers. Not a great combination for
making a living out of trading.
A number of common triggers for tilt
exist. Unfortunate stop-outs right at
the extreme of a swing or the day's
high or low can be frustrating. When a
trade is onside and comes close to its
target only to end up a full loser or
worse, it can sometimes be difficult to
take.
Buying what looks like an exceptionally
strong rally only for the market to turn
at the very price you entered at and
even perhaps it ending up the high of
the day, can really provoke strong
emotions.
Missing a number of legitimate trades
only to take a loser as soon as you
actually take one, also has the
potential to trigger tilt.
Whether it's just one or a combination
of these scenarios, the likelihood of tilt
being triggered is heavily influenced by
a trader's current susceptibility.
There are a plethora of reasons why a
trader might be more susceptible.
Trading with low amounts of capital
can mean that each trade has a big
impact on your account and this can
lead to being too dependent on the
outcome of a single trade.
Taking a few bad beats then becomes
not only infuriating, but crucially it
becomes a threat.
If you're experiencing a drawn out
losing streak or a period of low
performance, your emotional capital
could be particularly low already and
anything could end up tipping you
over the edge.
Of course alcohol or other intoxicating
substances, inadequate nutrition, poor
quality of sleep or a stressful situation
at home could also be problematic -
trader condition plays a huge role in
susceptibility to trading tilt.
Tilt isn't always created by the trader
themselves though. The type of
market movement is also likely to have
a big impact.
Seeing a trade stopped out quickly
when the market hasn't really been
moving a great deal, can evoke feelings
of vulnerability and generate a fight or
flight response. This is probably one of
the biggest dangers for a trader -
losing the ability to act rationally and
instead acting aggressively without
respect for risk, just as market
volatility spikes.
Increased market volatility and erratic
news driven behavior often leads to
tilt and painful losses.
The best advice I can give anyone who
ever has a problem with tilt (which is
most people) is that having a good
awareness of how you're feeling and
acting can be the key to stopping the
consequences.
Once you've been fully triggered, it
can be pretty difficult to get out of it,
so recognizing the signs and having
mechanisms to disrupt the impact can
help enormously.
These could include taking a break
from your screens, breathing exercises,
short intense exercise or a having a
hard daily loss limit.
Honestly though, it's easier to deal
with tilt before it happens. This
involves recognizing whether you're
currently susceptible to tilt, the types
of trading scenario that could be a
trigger, having an awareness when
those triggers actually happen and the
emotional signs that it's coming.
Calming down before trading tilt hits,
is a lot easier when you're ready for it.
Manage Tradi

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Manage Tradi

  • 2. Many will have heard of tilt in poker, but tilt in trading is probably far more devastating if not handled well and it can take a long time to recover from the consequences.
  • 3. Trading tilt is a phenomenon which tends to affect traders who are more active in the markets - those who take multiple intraday trades.
  • 4. This is because a trader has the ability to enter the market at any desired moment and so there's very little time to disrupt the tilt process once it begins or for strong emotions to fade away.
  • 5. Trading tilt is when a trader acts in a heightened emotional state. It's when you're unable or unwilling to control your actions in a logical manner and are driven purely by emotions.
  • 6. It's generally recognized as an active process, where a trader is compelled to take poorly thought out or rash trades.
  • 7. But it can also be argued that there's a passive type of tilt, where emotions prevent you from taking trades at all. I'm of the opinion that true tilt is about not being able to control your actions. This is what I want to focus on here.
  • 8. To get a better idea of tilt, think of a trading scenario where the internal conversation goes something like: - "Oh man - not again! I don't believe it! Well I'll show you!" and then you take a poor or rash trade out of anger or frustration.
  • 9. Trading becomes aggressive and all respect for risk goes out the window.
  • 10. If you don't recognize this, think about an argument you've had in the past with someone you care about.
  • 11. I'm confident that most people will have at least once said something in anger, which they truly did not mean and would take back if they could. But in the heat of the moment, they were unable to think logically and were driven by strong emotions.
  • 12. Going on tilt may or may not have an immediate impact on a trader. In fact, it's probably worse if the trader makes money in the beginning, irrespective of this type of trading.
  • 13. If they do, bad habits start to creep in and even worse, strong emotional responses to certain situations become second nature.
  • 14. Financially, the fallout from tilt can have a huge impact on the expectancy of a strategy. It only takes a few blowout trades to really skew performance.
  • 15. When this happens, it also leads to traders starting to snatch at their winners too. So the effect is doubled by taking smaller winners and larger losers. Not a great combination for making a living out of trading.
  • 16. A number of common triggers for tilt exist. Unfortunate stop-outs right at the extreme of a swing or the day's high or low can be frustrating. When a trade is onside and comes close to its target only to end up a full loser or worse, it can sometimes be difficult to take.
  • 17. Buying what looks like an exceptionally strong rally only for the market to turn at the very price you entered at and even perhaps it ending up the high of the day, can really provoke strong emotions.
  • 18. Missing a number of legitimate trades only to take a loser as soon as you actually take one, also has the potential to trigger tilt.
  • 19. Whether it's just one or a combination of these scenarios, the likelihood of tilt being triggered is heavily influenced by a trader's current susceptibility.
  • 20. There are a plethora of reasons why a trader might be more susceptible. Trading with low amounts of capital can mean that each trade has a big impact on your account and this can lead to being too dependent on the outcome of a single trade.
  • 21. Taking a few bad beats then becomes not only infuriating, but crucially it becomes a threat.
  • 22. If you're experiencing a drawn out losing streak or a period of low performance, your emotional capital could be particularly low already and anything could end up tipping you over the edge.
  • 23. Of course alcohol or other intoxicating substances, inadequate nutrition, poor quality of sleep or a stressful situation at home could also be problematic - trader condition plays a huge role in susceptibility to trading tilt.
  • 24. Tilt isn't always created by the trader themselves though. The type of market movement is also likely to have a big impact.
  • 25. Seeing a trade stopped out quickly when the market hasn't really been moving a great deal, can evoke feelings of vulnerability and generate a fight or flight response. This is probably one of the biggest dangers for a trader -
  • 26. losing the ability to act rationally and instead acting aggressively without respect for risk, just as market volatility spikes. Increased market volatility and erratic news driven behavior often leads to tilt and painful losses.
  • 27. The best advice I can give anyone who ever has a problem with tilt (which is most people) is that having a good awareness of how you're feeling and acting can be the key to stopping the consequences.
  • 28. Once you've been fully triggered, it can be pretty difficult to get out of it, so recognizing the signs and having mechanisms to disrupt the impact can help enormously.
  • 29. These could include taking a break from your screens, breathing exercises, short intense exercise or a having a hard daily loss limit.
  • 30. Honestly though, it's easier to deal with tilt before it happens. This involves recognizing whether you're currently susceptible to tilt, the types of trading scenario that could be a trigger, having an awareness when those triggers actually happen and the emotional signs that it's coming.
  • 31. Calming down before trading tilt hits, is a lot easier when you're ready for it.