Emotion - the biggest weakness of the trader | Forex Factory

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Emotion - the biggest weakness of the trader

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  • Are you an emotional person?
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  • #1
  • First Post: Mar 15, 2016 4:58pm Mar 15, 2016 4:58pm
Hello!
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!
ReneLH
  • #2
  • Mar 15, 2016 4:58pm Mar 15, 2016 4:58pm
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.
  • #3
  • Mar 16, 2016 1:10am Mar 16, 2016 1:10am
Hello Rene. Good luck with your thread. Psychology covers quite a bit of ground. But I’ll break the ice here and briefly touch on what you’ve mentioned in the title.

I don’t know if emotions are really a trader’s greatest weakness. Ignorance gives it some very serious competition. But regardless of whether it’s our greatest weakness or not, it is an area of concern. It’s 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 it’s not just traders.

The goal isn’t really to eliminate emotions. Instead we want to remain calm, alert, and confident while we’re 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 you’re upset or worried you stand a good chance of making a bad decision.

Using a trade size that keeps you interested but doesn’t 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 you’re 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 don’t sit around and watch it cook. That’s a way of helping me stick with the trade plan instead of reassessing it every few minutes. I’m 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.
  • #4
  • Mar 16, 2016 2:25am Mar 16, 2016 2:25am
Quoting ReneLH
I want to offer you a thread of psychology........
If you wish to focus on psychology, then here and here are two recent threads that might be of interest to you.
  • #5
  • Mar 16, 2016 2:49am Mar 16, 2016 2:49am
Quoting Pips_Cruiser
...... I dont know if emotions are really a traders greatest weakness. Ignorance gives it some very serious competition .....
+1. Thousands and thousands of threads, books and websites have been written about the psychology of trading ..... people lap it up, because it's something they feel they can control. But if a trader simply lacks the intellect required to identify and exploit periods of non-randomness, nothing can save him.
si hoc legere scis nimium eruditionis habes
  • #6
  • Mar 16, 2016 3:08am Mar 16, 2016 3:08am
That's my thing definitely. I'm subscribing
  • #7
  • Mar 16, 2016 3:21am Mar 16, 2016 3:21am
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...
Losers Hope, Winners Believe
  • #8
  • Edited 11:20am Mar 16, 2016 4:31am | Edited 11:20am
Quoting Pips_Cruiser
Using a trade size that keeps you interested but doesnt 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 youre pushing the envelope.
You're right. This is the one of the conditions of peace during trading. You can not take risks that might make you worry. With that, there is such a system: the trader starts trading with a small lot (low risk losing everything), and other positive factors, such as the right strategy and forecast, the trader starts to earn. After his balance multiplied by the coefficient n, it will be able to take on more risk than before. And this cycle can be repeated.
Because lot of the orders directly proportional to the balance and directly proportional to the interest risk
  • #9
  • Mar 16, 2016 5:03am Mar 16, 2016 5:03am
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!
ReneLH
  • #10
  • Mar 16, 2016 7:30am Mar 16, 2016 7:30am
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.
  • #11
  • Mar 16, 2016 9:39am Mar 16, 2016 9:39am
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.
  • #12
  • Mar 16, 2016 11:00am Mar 16, 2016 11:00am
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!
  • #13
  • Mar 16, 2016 11:20am Mar 16, 2016 11:20am
Quoting numbnuts
{quote} +1. Thousands and thousands of threads, books and websites have been written about the psychology of trading ..... people lap it up, because it's something they feel they can control. But if a trader simply lacks the intellect required to identify and exploit periods of non-randomness, nothing can save him.
I agree. Many traders are actively exploring this area. And they make the right choice, because human psychology - is the same bottomless world, as well as outer space. In addition, those who are looking for answers with the help of psychology are already winners of fear. Because each person's instincts are configured to fear and be afraid of everything that is not known. The researcher must be fearless, disengaged. Otherwise, fear will overcome him.
  • #14
  • Mar 16, 2016 11:21am Mar 16, 2016 11:21am
Quoting hanover
{quote} If you wish to focus on psychology, then here and here are two recent threads that might be of interest to you.
Many thanks for the link. Very interesting.
  • #15
  • Mar 16, 2016 3:48pm Mar 16, 2016 3:48pm
Quoting ReneLH
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...
If this is the instinct, such as self-preservation instinct, then it can only be put down to some extent. It refers to trade calmer - sounds simple, but in reality difficult. I am a quiet person, but also the general background of the excitement is always there. I will closely monitor the thread!
  • #16
  • Mar 16, 2016 5:33pm Mar 16, 2016 5:33pm
Quoting LawKin
{quote} If this is the instinct, such as self-preservation instinct, then it can only be put down to some extent. It refers to trade calmer - sounds simple, but in reality difficult. I am a quiet person, but also the general background of the excitement is always there. I will closely monitor the thread!
I think that rather than suppress, and learn how to use the extra emotional energy into thinking good. Deny emotions affect the mind.
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.
  • #17
  • Mar 16, 2016 5:34pm Mar 16, 2016 5:34pm
Quoting dkrock
This is how you control emotions. Simply overwrite them with a new reality. https://www.youtube.com/watch?v=Urun_rE79_Q
Thank you, I will definitely see. This is a very interesting subject.
  • #18
  • Mar 17, 2016 1:57am Mar 17, 2016 1:57am
Quoting ReneLH
{quote} I think that rather than suppress, and learn how to use the extra emotional energy into thinking good. Deny emotions affect the mind. 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.
So rightly.
  • #19
  • Mar 17, 2016 1:24pm Mar 17, 2016 1:24pm

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.)


Let's talk more about the beliefs.

Basic properties:

  1. - Beliefs can occupy a niche in the thinking and in the future to prevent the adoption of other information.
  2. - All active beliefs demand freedom of expression.
  3. - Beliefs live their lives. Apart from our opinions about them.

Beliefs resist any attempts to change their current state.
But we can transform the energy, transferring it from one concept to another, which would be more useful for us.
The illusion of certainty will continue to ruin the dream traders as long as they learn to control their abilities and probabilities.
In trading, there is no such thing as certainty - there is only a probability. The risk of loss will always exist. In reality, in order to engage in trade, you will have to accept uncertainty and have a trained mind.

There are three ways to transform and change the form of beliefs:

1. Affirmation
Affirmations work on the principle of substitution. At some point in time the mind can hold only one single thought, so are the affirmations is filling and hold in the minds of thinking that reinforce your desire.

Imagine a glass of muddy water.
You take the glass and put it under the faucet, turn on water, and start to pour clean water into it. Turbid water begins to spill over the edge, and net flows into the glass. Over time, all the muddy water will be replaced by clean.
Thus, you need to replace the belief that you can lose the conviction that you can earn. To do this, you need to identify the conviction and write it on a sheet. Then, write down on a piece of paper the question is why this happens. And then, to answer it as part of your resources. Thus, you force your mind to replace the problematic beliefs - already resolved issues.

To be continued...

Good luck
ReneLH

  • #20
  • Mar 17, 2016 5:07pm Mar 17, 2016 5:07pm
Quoting ReneLH
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,...
I still finished reading your thread and tried to write on a piece of everything I do not like in my trading. Then I recorded the cause of. Indeed, psychologically, it became easier. I tried to find a solution.
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.
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