User: Ryan Mallory: Education: Time Off For Sanity's Sake | SharePlanner

I have taken a few days off from active trading this week. I find this is sometimes necessary for my sanity as well as my brokerage accounts. 

Friday, I felt the rug being pulled out from under me as my $AAPL calls went into the dirt. I had that nagging feeling that I needed to make it back, which is about the most dangerous mentality any trader can have.

Pesky emotions!

As such, I took profits and went mostly to cash (save for my investment accounts) and decided to take a few days respite.

As I look at the market weakness that ensued among choppy conditions this week, it seems my timing could not have been better. It has given me a chance to focus objectively on the markets as well as take some time for my family. I often get so caught up in the day to day work that I do, that my family obligations get put on the back burner, so I got around to buying my daughter much needed shampoo and a new toothbrush as well as planning a Halloween party that I had promised. I am feeling much better and I have saved money to boot. 

As a trader, our emotions are our nemisis, but they also keep us safe. Feeling emotional on Friday led to adhering to a few rules that in the end kept me safe from losing money. I will be back to active trading next week but in the meantime I leave you with a few ideas to ponder for your own list of rules.

Every trader needs to figure out what rules he/she needs to set in order to avoid emotional triggers. Write them down and stick to them. When I stray from my rules, that is when I make mistakes.

Before you take any trade, determine a reasonable stop. Know ahead of time how much of a loss you can take without triggering your emotions. Size your trade so that your stop will not be a trigger. Set the stop to take the emotions out of it.

If you get stopped out or go to cash in your portfolio, don't be a hurry to build it back up. Remember, cash is a viable position.

Limit the number of trades you take on any given day. Over-trading can have disastrous results. This way you will only take your best ideas.

If you start to get emotional, shut it down and walk away. Then ask yourself what triggered your emotions and figure out a rule that will keep that trigger at bay.