Psychology Part 1

Skills You Don’t Need

#1 Revenge Trading

Revenge trading comes from one thing and one thing only , blaming market for your loss. But , think about this realistically ,Who is to blame when you have a loss? Who is responsible when you have a loss? YOU

One trade has nothing to do with the next trade. They are not related in any way. So attempting to get back in one trade what you lost in the last trade doesn’t make any sense. You can only profit from what is available in the current trade. And again, it has nothing to do with the trade you were just in.

When you feel compelled to get back what you just lost , you try and take on the market , almost as if to challenge it to a fight. That is certainly the wrong attitude. You want to flow with the market , not fight it. You can’t fight it , because you can’t win that way.

“You can’t change what the market will do , You can only change yourself.”

#2 Wishing , Hoping & Praying

There is nothing wrong with wishing , hoping and praying . We all hope and wish certain things will happen in our lives and that’s fine.

But there is no room for it in trading . The problem comes when we wish , hope , and pray that the market will do what we want it to. This puts us in a passive relationship with the market. When you wish , hope and pray that the market will do  certain thing or move in a certain direction , you are shifting the responsibility to the markets.

If you find yourself wishing , hoping , and praying the market will do something , this is an excellent indication that you do not have a good grasp of the current situation, and it’s definitely time to exit the position and re-evaluate.

“You can wish and hope that the market will come back , or you can cut your loss and make yourself ready to take the next opportunity.”

#3 “Just This One time” The worst  mistake you can make in trading

As we all know , to be successful at trading we need to come up with a certain set of rules we will follow each and everyday . These rules are extremely important as they give our trading structure and help us to decide what to do and , just as importantly , what not to do.

If you have good solid trading rules and you follow them consistently , you will be fine. But, on the other hand ,if you don’t follow your rules , you will receive many more losses than you would otherwise. And , here’s where the big mistake comes in.

If you don’t follow your rules and the trade ends up being a winner , you will most likely breathe a sigh of relief when it’s over. But in reality , you shouldn’t be relieved. You may have just made an error that will cause you to fail faster than any other trading mistake you could’ve made.

You see , if this trade (where you didn’t follow your rules) works out . then you will be more likely not to follow your rules the next time. Again , this is the worst mistake you can make . This will cause more damage to your trading account than any other error you can make.

And the worst thing is it’s so tempting not to follow your rules just this one time. But you must learn that there can’t be a “just this one time.” You must follow your rules every time , without exception.

I’m sure you will go through a time in your trading career ( if you haven’t already) where you will be tempted to not follow your rules just this one time. I can’t caution you enough how big of a mistake this can be , especially if it works out and you make a profit. Making money on this “rule-breaking” trade could very well be the most expensive profit you ever make. It then can easily reinforce you to not follow your rules the next time.

Following your rules consistently is the only way to be a successful trader. If you decide to not follow your rules just this one time, it won’t be long before you are part of the 80-90% of traders who lose money. Don’t let yourself become a statistic. Always follow your rules. Don’t let there be a “just this one time”

#4 Doubling Up : Adding To A Losing Position

There is the habit that some traders get into that can be very detrimental to your trading. There is nothing that can add more risk to your trading than adding to a losing position. But nevertheless , traders do it every single day. The main reason this happens is the same reason most other trading problems come up . Most traders do not want to admit they’re wrong . By adding to their losing position , they give themselves another chance to not be wrong.

Again, if adding to a losing position is a way to avoid admitting that we were wrong about market direction , then it would just go to show you that doing it (without a plan) is simply not acting in your own best interest. This is because if we want to act in our own best interest,  we must be willing to admit that we are wrong , instead of avoiding it and making things worse.