Traders sometimes lose control of their emotions and begin making irrational decisions based on fear, anger, or greed. This phenomenon is called “tilt.” It can lead to significant losses in trading, so it’s important to understand what it is and how to deal with it.
From this article you will learn:
- The phenomenon of tilt, driven by emotions like fear, anger, or greed, can lead traders to make irrational decisions, risking substantial losses in trading.
- Recognizing the signs of tilt is crucial, such as an inability to stop trading, improper risk management, emotional reactions, and overestimation of abilities, allowing traders to take corrective action.
- Strategies to combat tilt include developing and adhering to a trading plan, taking breaks, seeking professional help from psychologists or trading coaches, and incorporating mindfulness techniques to manage emotions effectively.
What Is Tilt?
Tilt is an emotional state of high excitement and tension. In this state, a trader may act unconsciously, make risky decisions, and lose control over their actions. Tilt often occurs after a series of unsuccessful trades, when a trader starts to feel anger, irritation, and fear – precisely the emotions that hinder profitable trading.
Where did this concept come from? The term “tilt” (or tendency to increase stakes) is widely used in the world of gambling. It describes the behavior of a gambler who, despite failures and losses, continues to make increasingly larger bets in hopes of a big win. As a result, such actions lead to the gambler’s bankruptcy.
Gambling and trading are two completely different types of activities subject to different laws. However, both are forms of risky investments. Therefore, the tendency to increase stakes, known as tilt, can also manifest in trading. In trading, tilt is also a reaction to stress, losses, and failures, which can lead to irrational behavior and risky decision-making. As a result, a trader may open more and more ill-considered trades, thereby leading their account to losses..
Signs of Tilt
Tilt can manifest differently in each trader, but there are several common signs to watch out for:
- Inability to stop. Traders continue open orders even if they notice that their decisions are becoming increasingly irrational and risky.
- Poor risk management. Traders may start increasing the size of their positions to quickly recover losses, which can lead to even greater losses.
- Emotional reaction. Traders begin to worry and even panic, which hinders them from making rational decisions.
- Overestimation of abilities. Traders may start overestimating their knowledge and experience, leading to even riskier decisions.
If traders notice any of these signs during trading, they should consider tilt as one of the possible reasons for these conditions:
- Excitement and irritability.
- Increased activity in the market.
- Making risky decisions.
- Using unusual trading strategies.
- Feeling tiredness and overall dissatisfaction.
How to Deal with Tilt?
Dealing with tilt is not as easy as recognizing its presence. However, there are several methods that can help overcome this condition. And the main one, of course, is to stop and take a break. When you feel like you’re in a state of tilt, it’s better to take a break and truly relax. Leave the market for a while and try to focus on other things. Here are some important steps to help you deal with tilt:
- Acknowledge the problem. If you feel like you’re in a state of tilt, don’t ignore it. Acknowledge that you’ve lost control of your emotions and take steps to regain it.
- Assess the situation. Try to understand what happened and why you’re in a state of tilt.
- Review your strategy. If you often find yourself in a state of tilt, it may be worth completely reviewing your trading strategy. Consider using stop-loss orders or other risk management tools, transitioning to long-term investing.
- Don’t open trades for a while. If you continue trading while in a state of tilt, you may make mistakes and lose more money than expected. In a state of tilt, it’s quite difficult to make rational decisions and assess risks.
Just as important as timely stopping is emotional control. Emotional management is a key skill for successful trading. Tilt often occurs after some stress. In such a situation, it’s better to leave the trading terminal for a while and do something that helps you relax and relieve stress. Experienced investors recommend increasing physical activity.
Some traders create and learn to recognize warning signals that help them notice when a state of tilt is approaching. But usually, this experience comes with months and years of practice.
Another way to combat tilt is to use stop-loss and limit orders. They help automatically close positions when the market moves against you or reaches a predetermined price level.
Developing a trading plan and sticking to it helps tremendously. The plan may include entry and exit strategies, risk and profit levels, as well as timeframes. For example, some traders set conditions under which they end their trading session. This could be a specific number of losses or profits for the day. If you reach this goal, don’t continue trading and take a break. Many traders also recommend taking breaks every few hours to gather their thoughts.
Finally, if you continue to struggle with tilt, it may be helpful to seek assistance from a psychologist or trading coach to help develop emotional management strategies and train the mind for a more resilient state during trading.
So, tilt is a serious issue for many traders, which can lead to significant financial losses. However, there are effective ways to combat this condition, including trade planning, using stop-loss orders, rest, and regular breaks, as well as using meditation practices and other techniques for emotional management. To become a successful trader, it’s not only necessary to know how to make money in the market but also to be able to control your emotions and combat tilt.