Many people heard about tilt in poker and its consequences. Tilt in trading, if you are not able to control it, perhaps is even more destructive and, in the majority of cases, traders need quite a long psychological and financial recovery in order to get rid of its consequences. Tilt in trading is a phenomenon, which causes harm to the most active traders who execute a big number of trades during a day. It happens due to the fact that a trader has a possibility to enter the market at any moment and they need a little time to bring their emotions under control before they manifest themselves in full force.
In this article:
- What tilt in trading is.
- Problems, caused by tilt.
- Tilt triggers.
- Tilt sensibility.
- Tilt reasons, caused by the market factors.
- Recovery from tilt in trading.
Tilt in trading is a situation when a trader acts in the state of a strong emotional agitation and either cannot or doesn’t want to control his actions, being completely in the grip of emotions. It is commonly believed that tilt is an active process in which a trader is forced to execute poorly thought-out or hasty trades. There is also a passive type of tilt when emotions keep a trader out of execution of any trade. In this article, we will speak about such tilt, which represents a complete absence of control over actions and, consequently, may lead to catastrophic effects.
In order to understand tilt better, imagine a situation during trading when your internal dialogue sounds like this: “What? Again! I don’t believe it! Well, watch out!” After which, feeling rage or despair, you execute a poorly thought-out or hasty trade. Trading becomes extremely aggressive and the whole risk management circles down the drain.
In case you haven’t faced such a situation, remember the most recent quarrel with a close person. The majority of people, at least once, said something, being enraged, which they actually didn’t mean and would prefer to eat their words, but they couldn’t control themselves being in a grip of strong emotions.
There is a probability of entering the state of tilt before the signs of a trading failure manifest themselves. It often happens that a trader initially makes profit, although he is already in an uncontrolled emotional state. In fact, this is even worse, because bad habits start to develop in this case. In some cases, strong emotional responses to specific market situations become the trader’s second nature.
In financial terms, the negative tilt consequences could exert serious influence on the expected profitability of the strategy. It takes just a few reckless trades to significantly corrupt the trading statistics. Very often tilt pushes traders to a premature closure of profitable trades. Thus, the negative tilt effect only doubles when you take less profits from the market and leave there more losses. And this is, as you understand, not the best way to make living by trading.
There are a lot of triggers, after emergence of which arrives a high probability of emergence of the tilt state. Making a loss after the price reverses nearly reaching the aim could be a trigger. Sometimes it is very difficult to cope with such a situation, which may lead to deterioration of your emotional state. Also, you might have bought some instrument on a strong rally (as you thought) but the market suddenly reversed at the moment of your entry. Missing a series of potentially profitable trades and making a loss immediately after you entered the market could also be a potential tilt trigger.
Regardless of which of the scenarios you experience, the probability of your entry into the tilt state completely depends on your sensitivity.
There are a big number of reasons which increase the trader’s tilt sensitivity. For example, if you trade with a small capital, every individual trade will exert a big influence on your deposit. In this case, some loss-making trades could throw you into rage and finally cause the feeling of fear. If you experience a long period of losses or low trading results, the level of your emotional capital may turn out to be so low that any negative event would result in the loss of self-control.
It is clear that alcohol or other matters that destroy brain cells, along with improper nutrition and sleep disorder and domestic stress, also may cause problems since the physical state of a trader plays a very important role in his sensitivity to tilt in trading.
And still, the reason for tilt emergence is not always in a trader himself. The forms of market movements also can exert a significant influence on him. A sudden closure of a trade by a stop-out at the moment of a sharp increase of volatility could cause the feeling of helplessness and ‘fight and flight’ reaction connected with adrenaline rush in a dangerous situation. Perhaps, one of the most serious dangers for a trader is the loss of ability to act rationally at the moments of sharp increase in market volatility.
Increased market volatility and your erratic behaviour, caused by the news, often lead to the tilt and painful losses.
The best advice for those who experienced the tilt state (and it is a majority of traders) is that the watchful relation to your feelings and actions could become a key to avoidance of its consequences. If you were caught by tilt once, it is very difficult to get out of it, that is why identification of its signs and development of a mechanism of blocking its consequences could render you huge assistance. It could be a break from sitting in front of the computer, breathing exercises, short intensive physical exercise or setting a strict daily loss limit.
However, truly speaking, it is better to try to avoid tilt at all. This assumes identification of your tilt sensitivity at a certain moment of time, identification of the trading scenario variant, which could serve as its trigger and your alertness in the event of the trigger activation and tracking emotional signs of the tilt state approach. It is much easier to avoid tilt, when you are ready, than to try to leave this state. We also recommend you to read the article about 14 emotional states of a trader.
And how do you cope with your emotions during trading? Leave your comments!