Emotion - the biggest weakness of the trader
I want to offer you a thread of psychology.
Many traders work aims to identify the market expectations and its further actions, but we must remember that not the least influence on the trader's success is the psychology. This was written many books and articles. And I would like to raise this topic for discussion, because it is important and useful for both experienced and beginner traders.
I would like to begin to survey the basic provisions and principles of the psychology of the trader.
Trader - Market Researcher. The market is related to the constant self-improvement.
The first, on which I would like to stay:
It is necessary to constantly learn. It is necessary to explore new methods of technical and fundamental analysis to try to determine the most popular current theories and methods of analysis.
Only control of your psychological state, and constant analysis own actions, including the incorrect ensure a pleasant and comfortable trading occupation.
Wish you a calm and stable trade successfully!
Remember Jesse Livermore, a great speculator, who twice became rich, but each time lost their capital. On the third - he shot himself. Must be able to control whether the emotions. On this, I would write the following comments later.
Hello Rene. Good luck with your thread. Psychology covers quite a bit of ground. But Iíll break the ice here and briefly touch on what youíve mentioned in the title.
I donít know if emotions are really a traderís greatest weakness. Ignorance gives it some very serious competition. But regardless of whether itís our greatest weakness or not, it is an area of concern. Itís an area of concern in other professions too. Doctors, lawyers, police officers, salesmen, and managers all have to learn to deal with their emotions if they want to be successful. So itís not just traders.
The goal isnít really to eliminate emotions. Instead we want to remain calm, alert, and confident while weíre working. If something distracts us from that mindset we try to move back towards it by relaxing and maybe taking some slow deep breaths. If the problem persists we take some kind of appropriate action. That might include going for a break, an early lunch, or quitting for the day. Sometimes the best course of action is to close all open trades. If youíre upset or worried you stand a good chance of making a bad decision.
Using a trade size that keeps you interested but doesnít stress you out is also important. I like the idea of starting with small trades and gradually moving up. Once you start feeling stressed out you know youíre pushing the envelope. For some people this would be time to move back down a notch. But others would attempt to stay with the new level until they start feeling comfortable with it. It depends on the individual, their current situation, and their goals.
I like to start the trading day with a good mindset. I prefer some exercise, fresh air, and good music beforehand. It helps make me feel calm, alert, and confident. Then I carry it with me while doing charts, reports, and assessing trade possibilities. If I enter a trade I set a stop loss and walk away. I donít sit around and watch it cook. Thatís a way of helping me stick with the trade plan instead of reassessing it every few minutes. Iím evidently better at the planning stage than the execution stage. I think my emotions sometimes cloud my judgment while a trade is open, if I sit around and watch it.
That's my thing definitely. I'm subscribing
I certainly agree... Most of the traders lose because of their own psychological problems... If one can master it then would certainly prove to be a better trader...
Because lot of the orders directly proportional to the balance and directly proportional to the interest risk
You can not be a successful trader if you are trading with emotions. refers to such conditions for trade with emotion, when greed and fear dominate when making trading decisions. You can not trade successfully if greed and fear control your trading. You will lose all their money and quickly. And this - the main reason why 90% of traders lose money.
The right thing to stick to a trading plan, namely to close the profit for take-profit, crop losses are the stop-loss. Then, you will always know that everything is going as it should, and you have nothing to worry about.
Here are a few common methods of elimination of harmful influence of emotion on trading process. We usually call such actions discipline. This primarily means that you should have some method and act in such a way as to follow this method in all conditions.
- Physical factors (comfort, sleep, breaks ...)
- Clear and definite basis for input to the position;
- A clear definition of and adherence to exit orders. (Stop-loss, take-profit);
- Trade deferred orders. When a trader is trading deferred orders, it does not have the possibility to watch price fluctuations and, as a consequence, the fear will not affect the final result;
- As stated earlier, use your funds properly. Do not exceed the risks and open the only available lot size;
And at the end of the article, a small task. Who is interested, we can offer solutions (:
Let the two chess players win with a "P" probability, and thus lose with probability (1-p). In this case one player - emotional player, that is, after a winning probability of winning the next game slightly increased and is equal to p + epsilon, and after losing the likelihood of subsequent loss also increased by the same amount of epsilon. Another player is cool and not emotional, so the probability of winning and losing him is not changed, remaining always constant. Question: Which player would be more effective?
Good luck and keep calm!
Emotions are mostly bad for traders even professional indulge in emotions for getting more profit are in loss . Emotion is that field in which trader has less control , Some times they are not aware the presence of these emotions which are harmful can disturb all their trading plan.
The thread is excellent. Periodically, you need to remind ourselves of the discipline, so very handy. I subscribe to remember the calm trade rules.
In fact, people react differently to the failure or victory. What you said about the fact that the trader must always learn - this is very true, because he must always learn not only to analyze the graph, but also to learn to control himself. Not everyone can do it well enough.
What about the the task, it reasoned as follows:
If originally the probability of winning both the same, it is unknown how it will events develop in an emotional player. According to the theory of probability - is 1/2. So, we can assume that the players will play in a draw endless number of times.
Continuing the theme of how to take control of their emotions.
To begin with, I want to clarify something. When a trader sees that his actions lead to losses and struggling to explore as many new products analysis, etc., it will not work.
The problem with this is the trader in the absence of the clear vision. Traders there is an assumption that the key to understanding the problems in the trade is out there somewhere. And when they find it, they came the success. This preconception prevents the trader to look objectively at the problem from a different perspective.
The problem is that there is a difference between how the traders develop psychologically, and how they learn to trade.
The ability to control your emotions gives the trader the opportunity to develop the ability to control their emotions, so that they did not take control of his mind.
A trader should not give up control of your emotional condition. It is a common opinion has taken place in the thinking of the traders and makes them blind, preventing them from realizing their full potential.
The brain is designed so that it is always looking for facts that he should give away doubt, check. In the case of trading, forecasts and market analysis - it's a constant work of the brain. He compares, doubts, checks.
It is in our evolution, in order to avoid danger. To get rid of this effect, you need to convince yourself to train your emotional intelligence.
As such, you can remember what the trade on a demo - account, when there is no a strong emotional stress, because the error will cost as Truman Burbank said "absolutely, nothing at all." It should strive to achieve in the real trading account, then, if properly calculate the probabilities, you can be successful.
On the methods of this hardening, I will write in the next post.
Have a nice day, to all!
Your answer to the question is adopted. But in fact, this problem has a paradoxical 2 response.
First: If the emotional player will win, his series of victories will last all the time
Second, contrary. If emotional player lost the first duel, he did not win.
I remind that tomorrow I will prepare the material on how to convince themselves and protect the mind from the emotions.
Continuing the theme of how to influence your psychology:
You can influence your emotions in several ways:
- Concentration and focus. What you focus on what is what will be your of activity. The question is how to take it. You are considering the possibility of loss or are considering the likelihood of achieving profits?
- Beliefs. This is a very powerful information filter. Convinced he does not see anything other than what is suitable for his beliefs. A person sees only what he wants to see. If a person has taken the installation to make a profit, it will go crazy if it means losing.
- Physiology (facial expression, posture, breathing, etc.)
Beliefs resist any attempts to change their current state.
For example: My "belief" is that I can not accept the loss, it is difficult for me. Therefore, in order not to have to worry about losing the deal, I put a stop order, leave the terminal at rest and go to to engage in anything that might distract me.
© Forex Factory