Trading Psychology
If You Master Detachment, You Master Trading
The best traders are not emotionless. They care deeply about execution without needing the market to give anything back. Here is how to detach from the outcome of a trade.
The moment you need something from the market, you stop seeing it clearly. You need this trade to win. You need to make the money back. You need to prove to yourself that you can finally do this.
Without realising it, you stop trading the market in front of you and start trading the outcome you are attached to. Learning how to detach from the outcome of a trade is what changes that.
One prerequisite. This matters once you have an edge: a strategy you know is profitable, and the problem is your own ability to execute it.
The Pendulum: Why Attachment Creates the Pain
When you take a stance and need something from the market, you leave yourself open to being a victim of circumstance and taking events in the market personally.
Think of a pendulum. The more attached you become to one side, a profit on this trade, a pleasurable outcome, the more painful the inevitable other side becomes. The swing to the right is counterbalanced by the swing to the left.
That attachment takes many forms:
- Winning the individual trade, or making back a loss
- Hitting a target you set for the week, the month or the year
- Replicating your backtested results exactly in live trading
- Proving to yourself and other people that you are a success
- Getting funded, getting a payout, feeling intelligent
The reality of the market is two-sided. You will have profit and loss, winning streaks and losing streaks. Expecting anything else is unrealistic.
Three Costs of Being Attached to the Outcome
1. It distorts what you see
The market communicates constantly: price over time, objective data. When you have bought into the belief that the next trade will be a win, you only let in the information that supports it.
That is why you drop to lower timeframes, add indicators you have never used, or check correlating assets. You are looking for confirming evidence. The market may be showing you useful risks and cues, and you do not see them.
Confirmation Bias: A Ubiquitous Phenomenon in Many Guises
You are no longer trading the market. You are trading the fantasy. The biases involved are covered in the seven cognitive biases that cost traders money.
2. It makes losing hurt more
The more pleasure you associate with a trade being a win, the more pain you associate with the opposite. When you do not get what you wanted, you have an unmet expectation, even on a loss that was a normal part of your probability model.
That unmet expectation is what leads to revenge trading, coming back in with more risk and overtrading. The pattern after a loss is covered in how to stop revenge trading.
A Computational and Neural Model of Momentary Subjective Well-Being
3. It costs you outside trading
This is the one most traders never consider. Trading and prop firms are worthwhile tools, and they have two sides, advantages and disadvantages, like anything else. Traders neglect the disadvantages, exaggerate the advantages and see a one-sided fantasy.
Then the stable job that provides a secure income cannot be appreciated, because it is being compared to a fantasy of quick and easy money. Traders resent it, and some leave it prematurely. Others build up pride around their trading, start talking down to the people close to them and push those people away.
Detachment Does Not Mean Not Caring
Detachment is not becoming careless or reckless. It is the opposite.
When you are attached to the individual trade being a win, you are trying to avoid the unavoidable, which is losing, and seeking the unattainable, which is winning all the time. That creates emotional volatility and stimulates the amygdala, and the amygdala wants to relieve pain and get pleasure immediately.
Remove the attachment to the win and you are no longer pained by the loss. You move into a state of process, where you care deeply about execution and can embrace either outcome on the individual trade.
How to Detach From the Outcome of a Trade
A big part of the reason you are attached to winning the individual trade is your past. Pleasurable wins you are trying to recapture, and painful losses you are trying to compensate for. Both drive the need to win this one.
1. Go back to the wins
Take a win you were elated by and are still proud of. What were the drawbacks and risks you were overlooking in that moment? How was it a disservice to your trading, your work, your relationships?
Do this across enough moments and winning gets redefined. It has rewards and risks, and you become less attached to it.
2. Go back to the losses
Take the painful losses and look for the benefits and advantages in those moments. Not to make losing good or winning bad. To see information you have been blocking out. Part of your attachment to winning is the desire to avoid losing, so when losses are easier to embrace, the grip loosens.
3. Bring it to the next trade
Once you have seen enough drawbacks in past wins, ask it forward. If I win this trade, can I see the consequences? If I lose it, can I see the advantages?
When you can see the drawbacks of the win and the advantages of the loss before you take the trade, the perceived reward of the individual win drops. The amygdala calms down and you can go into trades that align with your plan, with proven risk management, and stick to your rules.
From Outcome-Based to Process-Based
This is how a reactive trader who is run by the outcome becomes a process-based trader who is detached from the individual trade and focused purely on execution.
You go in with realistic expectations. You are present with the market. If it offers an opportunity that fits your plan, you take it, unreactive to either result. And if you have an edge, sticking to it is what lets you approximate it.
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Frequently asked questions
What does detachment mean in trading?
It means removing your attachment to the individual trade being a win. You still care deeply about execution, but you do not need the market to give you a particular outcome. That lets you embrace a win or a loss on any single trade and stay with your process.
How do I detach from the outcome of a trade?
Revisit past wins you are proud of and find the drawbacks you overlooked, then revisit painful losses and find the advantages. Before your next trade, ask what a win would cost you and what a loss would give you. Seeing both sides reduces the pull of the win and the fear of the loss.
Does detachment mean not caring about my trades?
No. Recklessness comes from attachment, not detachment. Being attached to a win stimulates the amygdala, which pushes you to relieve pain and seek pleasure immediately through overtrading and over-risking. Detachment is what allows you to care about execution and follow your plan.
Why do losses hurt so much even when they are part of my plan?
Because of an unmet expectation. The more pleasure you attach to a trade being a win, the more pain you attach to it being a loss. The loss may be a normal part of your probability model, but it does not match what you expected, and that gap is what drives revenge trading and extra risk.
Why do I look for extra confirmation before a trade?
When you are attached to a trade winning, confirmation bias lets in only the information that supports that belief. Dropping to lower timeframes, adding unfamiliar indicators or checking correlated assets are ways of finding agreement, and they block out the risks the market is showing you.
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