Risk Management & Position Sizing | OVTLYR UNIVERSITY Lesson 8
Trading Psychology & Emotional Sobriety
Introduction
Every trader wants discipline, but most don’t realize it’s a skill. Emotional mastery is what keeps you consistent, especially when the market tests you. This lesson shows you how to stay level-headed, follow your plan, and avoid emotional traps that derail most traders.
1. Trading Will Trigger You
● Trading brings up emotions like fear, greed, regret, and frustration.
● Every dollar at risk activates your survival instincts.
● Most mistakes come from emotional decisions, not strategy flaws.
“It’s not about being a robot. It’s about being emotionally sober.”
2. Understand the Emotional Cycle
The Cycle:
- You enter a trade with hope.
- It goes against you—fear sets in.
- You hesitate to cut it—now it’s regret.
- You revenge trade to make it back—more losses.
Recognize the pattern so you can interrupt it.
3. Discipline vs. Addiction
● Discipline = following your rules regardless of outcome.
● Addiction = needing to be in a trade to feel good or feel in control.
Signs of Addictive Trading:
● Overtrading
● Ignoring your stop
● Chasing trades outside your setup
● Trading based on boredom or FOMO
4. The Key: Emotional Sobriety
● Be clear-headed during the trade.
● Make pre-planned decisions, not reactive ones.
● You are allowed to have feelings, but don’t let them drive execution.
5. Spot Your Triggers
Ask:
● Do I trade worse when I’m tired?
● Do I revenge trade after losses?
● Do I hesitate to enter even when the setup is perfect?
● Do I move my stop once I’m in?
Identify your personal emotional patterns so you can manage them.
6. Principle-Based Execution
● Don’t trade what you feel—trade what you planned.
● Build a checklist and follow it.
● If it’s not a “yes” on every item, skip the trade.
This removes decision-making from emotional moments.
7. Daily Reset
● Every day is a new day. Leave yesterday’s trades behind.
● Wins can make you overconfident. Losses can make you hesitant.
● Show up neutral, focused, and ready to execute your plan again.
This wraps up Lesson 8. You now understand how trading psychology can work against you and how to stay grounded using emotional sobriety and rule-based execution. In Lesson 9, you'll build your full trading plan from entry to exit, so every move you make is intentional.
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