Can You Really Remove Emotions from Your Trading Decisions?

Trading psychology books and blogs often talk about the need to “remove” emotions from decisions to get more consistent trading results.

But can you really remove emotions from decision-making?

University of Bergen’s Hans-Rüdiger Pﬁster and Gisela Böhm argue that emotions are NOT outside forces that disrupt an otherwise rational decision-making process.

In fact, they believe that decision-making without emotional involvement is not optimal and maybe even impossible because emotions aid in four key functions in decision-making:

Preference construction

Any decision requires information, and a trader’s emotional state about a decision’s possible consequences can help form preferences.

For example, a trader who is choosing between buying bitcoin and buying the U.S. dollar will weigh the pleasure of making multiples of his investments against the pain of FOMO and trading a volatile asset.

Similarly, a trader thinking about closing a winning position might weigh the satisfaction of locking in profits against the fear of missing further gains.

These emotions do not guarantee the right decision. However, they provide information about which outcomes matter most to the trader.

The trouble starts when traders treat those feelings as facts. Wanting a trade to keep climbing does not mean it will, just as feeling nervous does not automatically mean the setup is bad.

Speed

From cavemen learning to run at the sight of a wild predator to consumers pressing the “add to cart” button like there’s no tomorrow, our emotional state has always factored into making decisions within a window of opportunity.

Not every quick decision is driven by emotion (think Tetris), but emotions can help traders process information and act faster.

Let’s say an asset is approaching a key resistance level and Harry, who has a long position, is already worried that bullish momentum is fading.

When price struggles to break resistance, that anxiety may help him recognize the warning signs and take profits according to plan.

Of course, the same anxiety could make Harry close too early if it is not supported by his analysis. Emotions can speed up a decision, but the trading plan should still determine whether that decision makes sense.

Assigning relevance

Traders are constantly bombarded with information. Emotions often help determine which details receive the most attention.

For example, a trader who was happy about winning an SMA crossover trade will likely focus on SMAs over trying a different strategy.

Likewise, the regret of a trader who lost pips because he failed to identify a longer-term trend will prompt him to pay closer attention to multiple time frames in his next trades.

Whether or not the trader chose the correct or incorrect aspects to focus on, the emotions he/she attributed to specific factors contributed to reaching a decision.

Commitment

Another requirement in making a decision is sticking by it even when confronted with opposing motives.

For example, confidence in a trading plan can help someone cut a loss even when hope is begging for a rebound.

The pain of blowing an account may also motivate a trader to use reasonable position sizes, even when greed is tempting them to bet the farm on the next “sure thing.”

In both cases, emotions can strengthen discipline instead of weakening it.

The examples above show why traders cannot simply remove emotions from their decisions. Emotions are already part of how they compare outcomes, process information, choose what matters, and stick to a plan.

It’s not emotions themselves that sabotage our trading decisions. Fear can make you cut losses, and anticipation of a winning trade can motivate you to stick to a trading plan.

This means that the goal for traders is not to be unemotional but to adopt the appropriate emotions to preferences that will lead to profitable trading decisions.

You don’t need to trade like a robot. You just need to keep your emotions from grabbing the steering wheel.

This article challenges the common advice to “remove” emotions from trading, but understanding which emotions are helpful starts with knowing yourself as a trader. Premium members can read our lesson:

📖 Know Yourself: Building Your Trader Profile

Reading this helps you understand your emotional tendencies as a trader, how those tendencies shape your decisions, and how to build a self-profile that accounts for who you actually are.

And if you’re not a Premium subscriber yet, now’s a good time to sign up.

With Babypips Premium, you get full access to School of Pipsology lessons that help you understand not just what emotions come up when you trade, but what those patterns reveal about you as a trader.

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Preference construction

Speed

Assigning relevance

Commitment

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