Trading tilt occurs when a trader experiences a string of losses or break-even trades and becomes overly emotional about the outcome of his or her trades which leads to feelings of anger, frustration, or hopelessness. Professional traders can still get into situations where they get “tilted” but oftentimes they are better equipped to handle these negative emotions or rarely experience them because they possess trading psychology skills and a set of beliefs that stops them from getting easily tilted in the first place.
Going On Tilt In Trading
Getting tilted as a trader can lead to making poor trading decisions in order for the trader to reach an “emotional equilibrium”. Being “on tilt” is a volatile emotional state which can lead to things like revenge trading if it’s not handled properly.
Tilt In Texas Hold’Em Poker
What Does Poker Have To Do With Trading?
Believe it or not, poker actually relates heavily to trading in the sense that it’s a game that involves probabilities and emotional discipline, and of course, tilt. Tilt is the same thing in poker, a volatile emotional state which leads players to make mistakes such as being overly aggressive which can lead to major losses if the player lacks discipline.
Being on tilt impairs your ability to think properly and make good decisions, whether in poker or in trading. You wouldn’t hop into a car and drive while drunk, and you shouldn’t try to trade when you’re still drunk on emotions from your last loss.
The Dangers of Trading While On Tilt
You Revenge Trade To Make Up For Losses
Revenge trading is easily the most common mistake traders make when they are tilted, and chances are you’re guilty of it whether you want to admit it to yourself or not. We have all revenge traded early on in our trading careers because it’s human nature.
You get frustrated over a loss (whether the trade you took was valid or not in your trading plan), and you’re upset over the outcome because you thought it’d work. No one purposely puts a trade on to lose. Now you’re experiencing pain because you’ve lost for the day so you attempt to enter the market again to try to cover the losses and potentially turn your negative day into a positive one.
You take another loss because you entered a trade that was low probability and that didn’t fit the plan. You may be able to see why this is a very slippery slope. Revenge trading is like throwing gasoline over the proverbial fire to extinguish it, and it can quickly spiral into a huge string of losses if you’re not careful.
Even worse, say you win on a low-probability setup. Now you’ve taught yourself that the behavior of revenge trading is okay, and in the long run when you get into this situation again, you’ll do it again and eventually blow your account because you deviated from your plan.
You Overtrade
Overtrading and revenge trading are close cousins in the family of dangerous trading habits. Really, overtrading can be revenge trading, and revenge trading can turn into overtrading. The key difference though is that with revenge trading, traders are usually trying to make up for losses, whereas with overtrading, it can be a result of trying to recover losses or because you’ve become overconfident from a string of big wins.
One could argue that you can be on tilt after a string of winning trades too because you’re at such a big emotional high that it impairs your judgment and decision-making the same way a string of losses would. This is why traders who win big and don’t have control over their emotions (trading psychology skills), often give their winnings back.
Hesitation, Fear of Loss & Chasing Trades
On the opposite end of the spectrum, traders who are tilted can also hesitate to execute on high probability setups in their system because of fear of loss, and subsequently, try to chase trades after they’ve already played out without them. Of course, this can turn into revenge trading and overtrading as well if the trader doesn’t have the discipline to accept that they missed a trade and move on.
FOMO & Second Guessing Your Analysis / System
Last but not least, tilt can also lead to fear of missing out and second-guessing your trade ideas, even if they’re valid. This can have a negative impact on your equity curve because you’ll miss out on the trade ideas that are valid and do work out while taking the subpar setups to make up for it.
How To Deal With Being Tilted
Know Your Limit & Play Within It
First and foremost, every trader should have daily and weekly limits in which they completely stop trading once they hit a certain percent drawdown or a number of consecutive losses. The same can also be applied to winning streaks in order to stop yourself from giving your profits back.
Limits are a key tool that every professional trader must use. In my case, it’s a maximum of 2 losses per day or 5 losses per week and I’ll halt trading by closing my trading terminal so the temptation to trade if I’m tilted isn’t there.
Keep A Detailed Journal & Review All Trades
The next thing I suggest is keeping a detailed journal for both your emotions and your actual trades. Whether that’s using an online trade journal like Swift Journal, and or using a small physical journal for writing down how you’re feeling before, while in positions, and after closing them out so you can reflect upon your emotions. By reflecting upon your emotions you’ll identify whether or not you are sabotaging yourself.
I personally like to write about how I’m feeling before and while I’m in a trade, then comparing it to how I feel once the trade has played out. Was I anxious? Was I pissed off and trying to get back at the market for a previous loss, resulting in revenge trading?
Stick To The Plan & Don’t Revenge Trade
The next tip is to stick to your trading plan! Every time you deviate from the plan you have in front of yourself, you rob yourself of the consistency you’re seeking. By sticking to the plan you’ll be less likely to go off the rails and revenge trade resulting in more losses.
Stop Adding To Losers & Never Touch Your Stop Loss
This one should be a no-brainer, but if you’re guilty of moving your stop loss away from your entry (resulting in a larger loss if price triggers the stop order), you’re making a fatal mistake. The same goes for doubling down on losing trades. If you do this, stop immediately as it isn’t conducive to being profitable in the long run. You’re better off using looser stops and making use of a forex lot size calculator so you are consistent with the amount of risk you’re putting on per trade.
Stop Trading & Take A Break
If it comes down to it and you’re struggling to abide by your own rules, or you’ve simply hit your pre-determined loss and trading limits which we talked about in the first point, consider taking a break from trading and re-group. This will give you the opportunity to cool down to purge the stress and frustration of being on tilt (it may take a couple of days, weeks, or even a month or more).
During this time it’s important to review your trades, make sense of what you’re doing wrong (and right), and to keep working toward honing your edge by doing things like backtesting or end-of-day markups.
If you need to though, you could also go on a hiatus for a week or two if the thought of looking at a chart is causing emotional distress. Nothing wrong with that!
When Trading Can Devolve Into Gambling
It’s Your Responsibility To Self-Regulate
Remember, as a retail trader it’s your responsibility to control your impulses and regulate your trading so that you, your mental health, and your P&L remain healthy. While it can be difficult to regulate yourself early on as a trader, it should be a big priority to develop good habits so you manage your risk efficiently and have a better chance of building a sustainable career in trading professionally.
If You Have An Addiction To Gambling, Get Professional Help ASAP!
If you feel like you’re really going off the rails and are completely violating your trading rules, risk management rules, and are compulsively gambling in the market to make up losses, stop trading and get professional help right away.
For some people, trading can turn into compulsive gambling which can potentially destroy your life. It’s important to practice responsible trading! If you think you, a friend, or a loved one has a gambling problem, follow this link for help: https://www.ncpgambling.org/5475-2/
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Robert Castillo @coldwaterfx FX Trader & Analyst Writer & Editor
Rob is a funded trader from Toronto, Canada, and has been trading currencies, commodities, stocks, and cryptocurrencies for over 7 years. Outside of trading, he enjoys making music, boxing, and riding his motorcycle.
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