This is How You Avoid Trading on Tilt

Posted by TopstepTrader on February 19, 2018

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Let’s say you’ve done everything right. You know your entry and exit points. You’ve got your stop losses in place. Then the markets open, things don’t go as planned, and you start to lose.

For most people, this creates an immediate and unpleasant physical response: sweaty palms, rapid breathing, and increased heart rate. But the worst part may be how the sudden upsurge of emotion seems to eliminate your ability to think clearly.

Poker players call that “tilt.” Playing (or in this case trading) on tilt is almost always a sign that a losing streak is on the horizon. Let’s take a look at the signs so you can avoid tilt and the losses that come with it.

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Your Brain on Stress

Tilt is your brain’s reaction to danger. When your brain perceives a threat, it initiates the flight-or-fight response. Part of that response is to release hormones, like adrenaline and cortisol, to prepare you for action. These hormones cause many of the physical symptoms we associate with stress, like the sweaty palms, racing heart, and dry mouth.

A perceived threat causes your emotions to kick in, too. As your emotional response increases, your higher brain functions, like planning, organizing, and self control, decrease. Essentially, when your emotions take over, your ability to reason goes out the window.

The threat that activates this response doesn’t have to be physical. Our brains like order and certainty. It wants to be able to predict results because our survival depends upon it. And since trading is basically the business of forecasting outcomes, you risk tilt on a regular basis.

Know Your Tilt Symptoms

Tilt is a completely normal function. More importantly, it’s involuntary. You don’t control, so the best you can do is avoid it. The first step is knowing the physical signs. In addition to a rapid heartbeat and sweating, you might also experience…

  • Tightness in your chest.
  • Butterflies in your stomach.
  • Headaches.
  • Nausea.
  • Trembling.

Perhaps the most important signs are the ones that show you are trading on emotions, such as…

  • Being overly aggressive.
  • Making revenge trades.
  • Struggling to keep details straight.
  • Ignoring your trading plan.
  • Hesitating on trades.
  • Exceeding your loss limit.

When you see these signs, it’s time to take a breather. If you are within your risk limits, log out and wait for the end of the day to check the markets. But if things have already gotten out of hand, remember the number one rule of trading: always make sure you can trade tomorrow. So, just close your positions.

Confidence is Critical

The next step to avoiding tilt is to know what causes it. Some common triggers are:

  • Market volatility. Our brains are designed to seek rewards and avoid threats, and wild swings make it difficult to know what will happen next.
  • Trades that just miss the mark. Making a trade that is onside but ends up a total loser can make you doubt yourself. The brain sees this as a threat to your status and may initiate the fight-or-flight response.
  • Missing legit trades only to move on a bad one. Again, mistakes cause self doubt and frustration, which the brain perceives as a threat.

You may also want to look closely at pre-tiggers, or events that may make your more susceptible to tilt. For instance, you may be more likely to tilt if you are:

  • Low on capital. Bad losses are a bigger threat when your account is low.
  • Tired. A bad night’s sleep may not cause tilt, but it makes trading more difficult. That can lead to poor decisions that make tilt more likely.
  • Stressed out. Trading is stressful enough, but add in pressure from other aspects of your life and your brain can be overloaded with threat signals.

Every trader has different triggers. One way to learn yours is to track your emotions in a journal. After every trading day, reflect on how you felt at the start, when you were trading, and after any trade. These notes can alert you to the potential for tilt before it starts.

Already tilting? The best thing you can do is to shut down for the day. However, you may be able to bounce back by changing focus. Walk away from the computer and try relaxing through:

  • Meditation.
  • Exercise.
  • Listening to music.
  • Breathing exercises.

When you feel your anxiety drop, you can get back to trading. Learn more tips for controlling your emotions in “Mastering Stress, Anxiety, and Trading.”

Do you think you could bounceback from this type of setback? Put them in the comments below.

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