As traders, we not only have to develop technical trading skills but also the emotional skills to trade successfully.

Emotional skills help the trader get through equity "draw-down" periods and multiple, consecutive trading losses that ALL trading systems experience if traded long enough. These tough events in trading will test the emotional fortitude of any trader.

This is where confidence in your tested trading system and trading with money you can afford to risk will play an important role. If the trader did not test his or her trading system, how do you think that trader will feel after four consecutive losses totaling approximately 8 percent of the trading account's equity?

Now, compound this with the fact that it is not money this trader can afford to lose. And, compound this again if the person is day trading and losing 8 percent in one day! And, the 8 percent assumes that you are controlling your risk so that each loss is only a net maximum of 2 percent per loss.

Now, after all this, do you think the trader will feel anxiety and stress? I think so! Do you think that stress will create a good environment for successful trading? I think not! Do you think the trader will be afraid of taking another trade for fear of another possible loss? Perhaps it might because this kind of stress can cause the trader to "second guess" him or herself and the trading system, whatever it is. Traders who trade with confidence will keep trading and not "second guess" themselves OR their trading system.

As a trader you want to eliminate any and all emotions while trading. This even includes emotions generated by having too many market opinions. Emotions never help the trader! Keep emotions in your personal life and away from your trading life.

The best way to keep emotions in check is by creating a stress-free trading environment where you accept equity "draw-down" periods and can keep trading through them in a stress-free state. You do this by testing your trading system or approach

In my opinion, the best testing method is to "paper trade" for a long enough time that you come to know the best, and the worst, that your trading system produces. "Paper trading" (again, in my opinion) is better than computer back testing because it represents how YOU are actually trading the system or approach. Yet, it's in a stress-free environment because no real money is being used.

I always tell traders, that, if they are not profitable "paper trading," they will not be profitable trading with real money. In other words, they are not ready to actually trade! It is far better to know that you are not yet ready then to jump in head first and lose your shirt!

So, the first step in getting a handle on your emotions is to create a stress-free trading environment that provides a solid foundation for you to apply your trading skills and, then, access how you are doing. If you're the one creating your stressful trading environment, you are short-changing yourself before you ever even start actually trading.

*Reprinted (and modified) with permission from Bennett McDowell