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LESSON: Making Emotional Trading Mistakes

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[op_liveeditor_element data-style=””][text_block style=”style_1.png” align=”left” font_size=”16″ font_font=”Montserrat” font_color=”%237e7e7e”]Emotional trading mistakes can be bought about by many different trading factors that include:

•  Losing a trade
• Making a trading mistake such as incorrect stop placement and then being stopped out before trade goes on to be a nice winner
• Over leveraging
• Not being in the right frame of mind away from trading, or having personal problems
• Trading other people’s money
• Entering trades you know you shouldn’t, then watching those trades fail

All these reasons and a whole swagger more contribute to your trading success or failure. The problem with making emotional errors in trading is it is like a roller coaster that is hard to get off.

EXAMPLE:

You’re having personal problems that have nothing at all to do with trading and you turn your computer on.

You want to feel better so you place a trade to get that feeling of being a winner. You know the trade you are entering is not a trade you should be in, that is your first mistake. The trade goes onto lose.

You feel more depressed and kick yourself and wonder why. Then you think “I have to get that money back” and you go onto repeat the process of trading a dodgy b-grade setup or mismanaging a trade.

You may be greedy trying to recoup your losses and before you know it you have lost your second trade!

How did this happen? Quite easily actually and unless you monitor yourself it is a very sneaky problem and this is one of a ton of scenarios all around making good – consistent decisions.

Let me give you another example…

You place a good solid setup. Price starts to go against you just after you placed the trade.

You begin to get nervous and really worry because you have lost your last 3 x trades and if you lose this trade it will mean you have now lost 4 x trades in a row and that will mean $xxx dollars out of your account.

You were sure price would just zoom off in your direction as this trade (like the previous 20) looked so great. You cut it short and take the trade off literally minutes after making a daily trade only to watch it THREE DAYS LATER go on for a winner.

The Fix

The problem however is easily fixed. In the next module we will discuss making a plan and setting rules, and that’s exactly what you must do.

When you are feeling sad or a little down you must have a rule in place that there is to be no trading. Or another rule might be more than 2 losses for the week and no more trading until the next week.

I had to learn this myself from experience many years ago. I have discussed this a few times in lessons that from personal experience, when you have something on your mind or you cannot devote your full focus to being a market winner, stay out and do something else. Or risk being chopped to shreds along with your money.

Lastly…

The Forex market is not there to make you feel better or feel worse. It is completely neutral. You will find the best trades you make and the most profitable times you will have, are when you are in “The Zone” or you are completely free in the mind.

Try and always emulate this state of mind and never try to claim happiness from the markets. It just won’t work.

Whilst you may be happy when trading or, happiness may be a byproduct of your trading because you enjoy being a trader, DO NOT make it connected to your trades and having to be in a trade just to be happy.[/text_block][/op_liveeditor_element]