Emotional Hijacking in Trading: Have You Fallen Victim?

In trading, 'emotional hijacking' is a common phenomenon, referring to emotions suddenly taking over rational thinking, leading us to make impulsive and unreasonable decisions. This psychological state can not only disrupt your trading plan but also cause you to miss out on opportunities at critical moments.

1. What is Emotional Hijacking?

Emotional hijacking often occurs in the following scenarios:

Fear when facing losses: After a price drop, fearing continued losses, you choose to cut losses and exit, only for the market to rebound shortly after.

Impulsiveness when chasing highs and cutting losses: Seeing a market surge and unable to resist buying at a high; or in panic, hastily selling during a downturn.

Blind optimism after consecutive gains: Short-term success leads you to overlook risks, over-leverage, resulting in significant losses from a single mistake.

Behind these behaviors is the replacement of rationality by emotion, leading you away from your trading strategy.

2. How to Cope with Emotional Hijacking?

Develop a Trading Plan and Strictly Execute It

Before trading, clearly define your entry, take-profit, and stop-loss rules, and strictly adhere to them without being swayed by short-term emotions.

Set a 'Cooling-Off Period'

Give yourself a few minutes for deep breathing before making decisions, assessing the current market situation and your emotional state, avoiding impulsive actions.

Record Trading Emotions

After each trade, record your psychological state and the reasons behind your decisions. By reviewing, understand how emotions impact your trading behavior, and find ways to improve.

Reduce Position Size and Diversify Risks

When emotional influence is evident, reducing position size can alleviate psychological pressure while avoiding significant impacts on your account from a single trade.

3. The Essence of Trading is Rationality and Discipline

Market fluctuations are the norm, but our emotions should not fluctuate with them. True trading experts not only know how to analyze the market but also understand how to manage their emotions. Emotional control is a crucial step to trading success.