TRADING DISCOMFORT

Causes of Trading Discomfort

Discomfort in trading usually comes in two forms and both have micro and macro causes.

Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.

This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.

Are you down big for the year in your trading account?  Are you in financial trouble in your regular life?  Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?

Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”

This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.

Or once again it could be a related to larger issue.  Are you the type of person that always needs to be in control in your life?  Do you have an obsession with always being “right?”  Is the world a place that would  be better off if it listened to your opinions DAMMIT?

Whatever the cause of the discomfort, in an attempt to end it as fast as possible, traders often make bad decisions that affect performance.

Effects Of Trading Discomfort

The list of things traders do because of discomfort is endless, but here are some of the more common ones;

Getting back into a trade too fast after a loss – Your pristine trading day is blemished by a loss after your first trade, but instead of waiting to find another suitable setup, you find yourself rushing back into a trade, because that is the only way to “get it back” and end the discomfort.

Closing a losing trade too soon –  A trade has gone against you, and you can’t stand that you are in the red.  Even though your stop has not been hit yet, you know it will be and you just want to cut your losses and end the pain, so you close the trade early.  Your pain is only increased when price reverses before your original stop and proceeds higher, into what would have been a profit.

Closing a winning trade too soon –  You have a profit.  You need a profit.  You want to bank that profit, even though price has not hit your target.  Every minute that profit is open there is a chance it can go away, and so you take it right where it is, only to see price continue higher, and higher, and higher throughout the rest of the trading day.

Holding a winning trade too long –  Price has hit your target, but you want more, because you need more.  You let it go, until it reverses and comes back down below your target. With every tick down you continue to hold the position because you wanted to close it out one tick higher.  Eventually it goes back to even, or worse, into a loss.

And the list goes on.  One thing that is important to remember about discomfort is that it can cause you to make bad decisions, but it can also cause you to make no decision by paralyzing your thought process.