EMOTIONAL TRADING AND HOW TO STOP IT p2
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EMOTIONAL TRADING AND HOW TO STOP IT
This post goes as a continuation of the previous one, so if you haven't read it, I highly recommend it (link in pinned post)!
The emotional trader sometimes has losses, that can costing him much more than just losing money. Having been upset, because of a particular losing trade, such a trader fall into emotions and tries to return everything, that he lost. He is ready to ignore the rules of his trading system and money management for this, eventually losing more and more.
When such a trader has several profitable trades in a row, he is also unable to stop and tries to maximize the success achieved. Trying to extend the winning streak as long as possible, he begins to open trades, that he would otherwise avoid, and in the end everything ends by losing money again. This familiar trading problem is usually quite expensive and costs for a trader - time, money and self-esteem.
If a trader wants to break out of this vicious circle, then he will need to deal with his feelings, thoughts or actions. Find and change the negative psychological attitude that leads to the appropriate behavior.
A good starting point is to ask yourself: Why am I trading this way? Answering this question in writing (which is desirable), listing your thoughts, beliefs and assumptions, you can come across something like this list of answers:
❗️ “If I don’t end every day with a profit, then I'm a failed trader. I can’t afford losses and close the day in the red”
❗️ "If I don't fight the market to get my money back, that will mean I've given up"
❗️ “I just need to work on more deals and I will succeed”
❗️ “When I trade profitably, luck is on my side. But everything can change at any moment. So I need to make the most of the situation and open as many trades as possible while I’m lucky.”
❗️ "The market wants to ruin me"
In some ways, we all remain "Pavlov's dogs" - the more and more often we repeat a certain behavior model, the better it's remembered, eventually reaching almost complete automatism.
That's just a very rough list, but even looking at it, it's easy to understand how these or similar thoughts can shape certain trading behaviors. Since such a trader feels like a loser until he gets his money back, he will do everything to regain the feeling of a winner. At the same time, thanks of negative experience, such a trader doesn't believe that his trading will be consistently profitable in the long term, and therefore tries to “snatch” as much as possible from the market, which leads to even greater losses.
By reflecting on and changing each of these negative beliefs, a trader will be able to understand how irrational they are. Then he can replace these psychological attitudes with more positive ones:
💙 “I don’t have to end every day on a positive note. It is more important for me to maintain a positive balance in the long term.
💛 “Admitting a loss on a particular trade is not the same as admitting defeat. Instead of trying to immediately recover losses, I will analyze my trading and find out why I took a loss. This way I can prevent this situation from happening again in the future.”
💙 “Increasing the number of deals is not the key to winning. It is much more productive to improve their quality.”
“When I am trading well, it is because I am in better shape. Luck and luck play a certain role in my life, but do not determine it. As I succeed in trading, I am grateful to myself for this, and I will continue to try to make smart trading decisions in the future.”
💛 “The market does not want to kill me. He is neutral and completely indifferent to me personally and to my trading results. He has no consciousness and is not able to think independently. And he does not try to punish me at all or deliberately harm me.”
If the trader in the example looks at this list every day, it will help him stabilize his emotions and make smarter trading decisions. On the one hand, these attitudes do not provoke intense and emotional trading, and on the other hand, they do not lead to the development of laziness and apathy.
Have you tried to write Your thoughts?🧐 If not, try it,(it works good) If yes, please share your experience in the comments.
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Always Sincerely Yours Rocket Bomb 🚀💣
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