Master Your Emotions and Trade With Confidence in 2025

Trading isn't just about numbers and charts. It’s a mental game. I've been journaling, really trying to focus on the mental aspect. After all, how you handle your emotions can make or break you. I wanted to take a moment to share some seriously helpful stuff that Louise Bedford taught me on Mind Over Markets.

She's all about sculpting mental toughness for market success. And can "awfulizing" really impact your trading profits? Yes!

So, what's "awfulizing?" Louise made up the word, but it is based on catastrophizing. Psychologists use the term "catastrophizing" to describe a "mood tunnel." Basically, it is where you're speeding toward a brick wall as fast as you can. You make everything in your mind extreme and dramatic.

Awfulizing is similar, but not quite as intense. It's when we think skipping a stop is the end of the world. This kind of thinking dumps dopamine and adrenaline into your system. Stay at that level too long, and you'll burn out.

Here are some specific examples of awfulizing thoughts:

Sound familiar? Yeah, me too.

Think of emotional distance in trading like this. As expert traders, we try not to swing between total joy and utter despair. We aim for equilibrium. We want to avoid extreme ups and downs in our behavior and thoughts.

I remember my first few trades. When I won, I was running around the house singing "I Want To Be A Millionaire!" It was ridiculous. Then, when I lost a little money, I was like, "We're going to live under a bridge!"

Louise has seen this firsthand. She even admitted it wasn't always fun for her husband to deal with her emotional swings. Trading this way does no good.

I try to "make it boring." Less emotion, fewer swings.

When I started out, I thought candlestick charts were the holy grail. I thought every trade would go up, up, and away to a pot of gold. It looked like easy money.

But that's not what happened. Everything fell apart. Every trade seemed to self-destruct. That's not a recipe for long-term success or happiness.

We need to avoid this!

Psychological fitness is how flexible and emotionally tough you are. How do you handle market blows and still stay sane?

Here are five reasons why we need to develop this equilibrium:

It's so easy to tie our joy to the markets. We think about what we'll do with the money. But this narrow view stops us from enjoying other things. It can feel like we're drowning. It impacts relationships and our overall happiness.

I've had some big losses. It's horrible. I didn't know what to do. I paced around the house. I called my partner, but she didn't really get it at first. When I told her the number, she woke up.

It was an overwhelming weight. Adrenaline, shaking hands. It lasted for days. I didn't touch the market for three weeks. It's like a toddler touching a hot stove. You get burned and pull back. Life teaches us to seek pleasure and avoid pain.

Near miss psychology is interesting. Think about a lottery ticket. You nearly get all the numbers. It keeps you hooked. You buy another ticket, thinking you're due for a win.

The market is the same. We can see it go one of two ways. Louise told a story about nearly having the biggest loss of her life. She had written call options and didn't understand risk minimization. She saw money coming in. News Corp jumped up, and she was in trouble.

She had gone shopping and was about to pay when she realized she could be in the hole for $700,000. She couldn't afford that. She ran back to her car and sped home. It was terrifying.

This near miss psychology throws us off balance. That is what we're trying to avoid.

There is a solution. It uses cognitive behavioral therapy (CBT). CBT is evidence-based.

Here are three questions to avoid awfulizing:

Let's apply this to my loss. I was sweating, pacing, and feeling awful. I was calling myself stupid. Saying I'm not good enough to be a trader. I should get a job.

I generalized that one loss into the future. And I rewrote my past. The evidence was that I'm a clutz because of this trade.

So, is it true that I'm a clutz? I've done thousands of trades. We're taking one data point and generalizing it across everything.

I still think I was an idiot for that one trade. But overall, no.

The way I was thinking about it, was it useful? Maybe. It was a painful lesson. It got my attention. It disciplined me. It made me reconsider and respect the markets.

It's okay to keep the positive effects. But drop the negative ones. Carrying that emotion into the future won't do any good.

So, what's a good way to reword it? How do I explain it in a way that I don't feel stupid?

The first step is listening to episode one of Mind Over Markets. Morning journaling is the purest way to take away its power over your future.

I'm not saying you have to be positive all the time. There's a cost to toxic positivity. We feel pain and anger for a reason. Become aware of whether it controls your future. Are you backing away from things because of negative self-talk?

We often talk to our friends better than we talk to ourselves. We have the worst automatic thoughts going through our own brains. It hurts us.

Separating shame and guilt is so important. Everyone makes losses. We all feel fear. We all have self-doubt. But make sure it doesn't impact future behavior. Make sure you don't back away.

Overcoming fear and awfulizing is vital in trading. Apply these strategies.

Thanks to Louise for her help.

I'm working on separating shame and guilt. I'm using the lessons I've learned from losses to improve my future performance.