1. Anger over a losing trade – Traders usually feel as if they are victims of the market. This is usually because they either 1) care too much about the trade and/or 2) have unrealistic expectations. They seek approval from the markets, something the markets cannot provide.
2. Trading too much – Traders that do this have some personal need to “conquer” the market. The sole motivation here is greed and about “getting even” with the market. It is impossible to get “even” with the market. Trading too much is also indicative of a lack of discipline and ignoring set rules. This is emotionally-driven.
3. Trading the wrong size – Traders ignore or don’t recognize the risk of each trade or do not understand money management. There is no personal responsibility here. Typically, aggressive position sizes are used, however if risk is not contained, then it could spiral out of control. Usually, this issue comes from traders wanting to make a huge killing. Maybe they do win, but the point is that a bad habit emerges if a trader repeats this behavior.
4. PMSing after the day is over – Traders are on a wild emotional roller coaster that is fueled by a plethora of emotions ranging throughout the spectrum. Focus is taken off of the process and is placed too heavily on the money. These people are very irritable akin to the symptoms of premenstrual syndrome (something I wouldn’t know about personally).
5. Using money you can’t afford to lose – Usually, a trader is pinning his/her last hopes to make money. Traders fear “losing” the “last best opportunity”. Self-discipline is quickly forgotten but the power of greed drives them, usually over a cliff. Here, the rewards are given more attention and overall personal financial risk is ignored.
6. Wishing, hoping, or praying – Do this in church, but leave this out of the market. Traders do not take control of their trades and cannot accept the present reality of what’s happening in the market.
7. Getting high after a huge win – These traders tie their self-worth to their success in the markets or by the value of their account. Usually, these folks have an unrealistic feeling of being “in control” of the markets. A huge loss usually sobers them up pretty quickly. It’s important to maintain emotional restraint after wins, just as you would for losses.
8. Adding to a losing position – Also known as doubling, tripling, quadrupling down, typically, this means that the trader does not want to admit the trade is wrong. The trader’s ego is at stake and #6 comes into effect as the trader is hoping the markets will “work in their favor”. If you are wrong, you have a near 0% chance of making a full recovery. (more…)
Archives of “bad habit” tag
rssMoney solves all of your problems.
It is often said, trading introduces you to yourself. I was in my second year of trading when I heard that phrase. She would go on to ultimately teach me much about life and myself. The benefit of being in my early 20′s and teaching people in their 40′s and 50′s. I helped them with trading, they helped me grow up.
What that phrase means is that who ever you are that day will show up in your trading. This of course comes in varying degrees.
In many professions your emotional state may not effect your earnings or employment. In trading, a “bad” day can create a cascading effect. You lost when you should have made money. You created a bad habit. Losing doesn’t trigger the right response, etc.
A trader views the market through themselves. Now, most of the time it is little things that can be easily passed over. Human beings are always going to have to deal with things they rather would not have to. Every person has a bad day. (more…)
Money solves all of your problems.
What that phrase means is that who ever you are that day will show up in your trading. This of course comes in varying degrees.
In many professions your emotional state may not effect your earnings or employment. In trading, a “bad” day can create a cascading effect. You lost when you should have made money. You created a bad habit. Losing doesn’t trigger the right response, etc.
A trader views the market through themselves. Now, most of the time it is little things that can be easily passed over. Human beings are always going to have to deal with things they rather would not have to. Every person has a bad day.
Money solves all of your problems, till it doesn’t. The difficult part about trading is the problems start and the money (win or loss) CAN come at different times. Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst). Well it turns out the headline is old and everyone already knew about it. The story/money and what it bears can often come at the “wrong” or different times. You are rewarded or punished just not always easy to connect the actions in real time.
Money does not necessarily mean your actions are correct. Yes over time it evens out but some run out of money, patience, emotional currency before it corrects. They weren’t honest about who they were that day. It is prudent to always look a gift horse in the mouth.