This is certainly a touchy topic and a bit esoteric when it comes to trading emini contracts.  Yet, it remains the most important aspect of trading success, and least understood.  Traders simply do not want to discuss their mindset when trading.  After all, you follow a system and take the trades and your account piles in the money.  Right?

Wrong!

I have read several good books about trading psychology and still find the topic baffling.  Why do traders risk capital on trades that are clearly not the set-ups they are accustomed to trading?  Is it greed?  Is it false subliminal intuition?  I think it is both, and trades that are taken for emotional reasons are the trades most traders are likely to ride the longest, regardless of how far out of the money they get.  Of course, this is just a personal observation, but having watched hundreds of traders at work, when a trader develops an emotional attachment to a trade it is very difficult to “cut the ties” to the trade and move on.

But why do we develope emotional ties to a trade?

Again, this is a very difficult question to answer, as every trader possesses a different constellation of thought as it relates to trading.  Somehow, many traders become convinced that a certain trade “has to succeed” and find it difficult to dislodge that thinking despite the evidence on the chart that the trade is a poor one.  Yet, I’ve watcged countless trade inexplicably ride a terrible trade into the ground after it became obvious they had made a poor decision in entering the trade.

The answer for the problem is to remove your emotions from trading, but this answer is nearly impossible to implement.  Our emotions are an integral part of who we are.  We are not robots.  Yet to trade effectively, one must assume a robot mentality and realize that intuition is an absolutely useless attribute in choosing trades.  Good trading is a function of knowledge, experience and self-discipline and nothing more.  I have yet to meet a trader who can spot the unseen set-up where empirical evidence simply doesn’t exist.  Of course, in the movies or in books you read about fictional traders who see patterns and set-ups in the market that no one else sees, but that notion is the stuff of fiction.  Stick to your system.

The toughest maxim for me to assimilate, at an emotional level is: The market is always right, and I am always wrong.  When I am in a trade the market cares little for my expectations for the trade, as the market is essentially a function of the combined psychology of millions of traders, not the psychology of my trading, and when I am on the wrong side of a trade I am, quite simply, wrong.  That is, indeed, a tough pill to swallow.