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.