Archives of “fear” tag

rss

The Hidden Variable in Your Trading Success

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Most traders realize that trading involves a lot of psychology. And most traders readily admit that a significant portion of their trading losses, or lack of performance, is due to “psychology”.  Although the term ‘psychology’ isn’t always mentioned as an explanation, you can see it easily enough in the following statements ……”I froze just as I was about to pull the trigger”….. ”I hesitated and missed that trade and was so pissed that I got myself into an impulse trade right after”…..  “That large loss was not what I wanted, I held it thinking it would come back because last time I bailed out of this type of trade I got stopped out right before it reversed”….. “I was really nervous about losing money again so I got out of my winning trade way before my target”

Those are four common examples of trading psychology issues manifesting in one’s trading.  Do you recognize yourself in the above statements? (more…)

Fear & Euphoria

  
  Education
#  #  #  #  #  #  #  #  #  #

fear-euphoria

It is inordinate “fear” and “euphoria” that prevent us from achieving our investment goals. And, the impact of these excessive emotions can be seen across the spectrum of traders.

  • The beginner who won’t put on a trade until he is certain the next trade will be a winner.
  • The trader who “knows” what the market will do and as a result refuses to exit a losing position.
  • The same trader who ignores market information that is contradictory to his position.
  • The same trader who becomes paralysed with fear – “Dear God, just let me break even! I promise I won’t do it again!”
  • The student who refuses to send in work because he doesn’t want to be told that his hours of work are “wrong”
  • The trader who after a series of wins feels “he’s made it!” …and becomes reckless.

The 10 Alarming Things in Trading

  
  Education
#  #  #  #  #  #  #

I was reading this article and started thinking about the ten scariest things in trading: The Top Ten Things That Make Horror Movies Scary. 

1. Fear of Death.  This is the ultimate fear, both existentially and psychologically. It isn’t really a horror movie if people don’t get killed.

In Trading: fear of depletion of assets.

2. The Dark. From our earliest childhood we are afraid of the dark – not the dark itself, but what it hides. It makes horror movies even scarier to watch them in a darkened theater, or a dark living room, right?

In Trading: not knowing enough news

3. Creepy, Crawly Things. Snakes, spiders, rats, and other crawling things are scary in and of themselves, but when they touch the skin, in the dark, it amplifies this common phobia.

In Trading: monthly expenses

4. Scary Places. Horror movies are full of scary places – graveyards, old houses, overgrown forests, dungeons, attics, basements. These are dark places, where evil things can hide. (more…)

Fear and Greed in Financial Markets: A Clinical Study of Day-Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

GreedkillsContrary to common folk wisdom that financial traders share a certain set of personality traits, e.g., aggressiveness or extraversion, we found little correlation between measured traits and trading performance. The study finds that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance. Psychological traits derived from a standardized personality inventory survey do not reveal any specific \trader personality profile”, raising the
possibility that trading skills may not necessarily be innate, and that di erent personality types may be able to perform trading functions equally well after proper instruction and practice.

Ten questions to ask yourself before every trade

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

  1. Does this trade fit my chosen trading style? Whether it is:  swing trading, momentum, break out, trend following, reversion to the mean, or day trading? Does this trade fit into the parameters of who I am as a trader, or is it just based on my own fear or greed?

  2. How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital? Knowing where my stop will be how big should my position size be to limit my risk?
  3. What are the odds of my risk of ruin based on my capital at risk?
  4. Why am I entering the trade here? What is the entry trigger to take the trade? Is this a quantified entry on my trading plan?
  5. How will I exit with a profit? A price target or trailing stop? (more…)

Disaster

  
  Education
#  #  #  #  #  #  #

When the market becomes volatile or a series of trades produce loses, it is easy for us to become fearful.

We then start to verbalize excuses as to why we even executed those trades or why we use the trading strategy that we use or any of a long list of items.

For all of us as traders to continue to grow, we need to develop a better way to address these situations. The foundation for this is analysis.

If we will be honest and look at the entire situation, generally we had executed a solid trade, however due to the very nature of the financial markets; an unusual movement occurred that caused us to not receive the results we expected. If we do this, most of the time we will see this fear, this confusion or these excuses just evaporate.

Are these times comfortable, never. Chaos is not comfortable, nor will it ever be.

But the successful trader will step up to the plate and handle this challenge instead of succumb to it. Do not allow a challenging situation to become a disaster because of fear or excuses.

6 Mistakes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #

Mistake number one: not having any knowledge of the simple visual indications for when to enter a trade based on market behavior and common sense.
Mistake number two: not being on the right time frame at the right time for the current trading opportunity.
Mistake number three: entering trades long AFTER the real entry occurred and exiting way BEFORE the exit occurs.
Mistake number four: no trading plan or direction for a consistent entry and exit strategy.
Mistake number five: following some scam Forex system they recently bought on the internet and using dozens of “proprietary” indicators.
Mistake number six: entering and exiting trades for reasons other than their own trading method. (fear, greed, etc)

The James Bond Method To Stock Trading

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

So you want to be high flyer? Drive fast cars, attract the hot women, and travel the world? What sounds like the James Bond way of living, isn’t actually too far off that of a successfully wild stock trader?

While this approach might not be the most risk-adverse style of trading , we can all learn a thing or two from James Bond when it comes to making big bucks in the stock market.

Don’t worry about the consequences

While he may get himself into some crazy situations, James Bond never lets fear get in the way of getting the job done. Bond will walk straight into dark hallways and rooms filled of bad guys, confident that he has the upper hand.

Just like Bond, you too can block out potential consequences of stock trading. Don’t let the fear of losing money or a failed trade scare you away. Head into any situation, confident in your trading strategy.

Never get stressed out

For as great as Bond is, no other action hero gets caught into messy situations as much as Bond does. From the initial capture to just seconds before he finds his way out, Bond never loses his cool.

He stays calm under pressure and focuses on what to do next, rather than what might happen.

Just like Bond, you too can learn to keep cool under difficult situations. Understand that you don’t necessarily need to sell at the first sign of red or throw more money at the stock. Simply stay calm, asses the situation, and find your way out.

Don’t stick around too long (more…)

The Power of Regret

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Everyone knows that chasing price is usually not beneficial, we either end up catching the move too late, or we get poor trade location, which makes it more difficult to manage the trade.

However, there are other forms of chasing that are just as common, maybe more common, and just as counter-productive.   As a trading psychologist I see these all the time.

Traders who are not profitable are often too quick to chase after new set-ups and indicators, or a different chat room, if that’s your thing.  Obviously, we need to have a trading edge, whether it is from the statistical perspective of a positive expectancy, or simply the confidence in a particular discretionary strategy such as tape reading, following order flow, market profile, etc.

Chasing a trade is the fear of missing out. The fear of missing out is associated with various emotions, including regret. In my work with traders and in my own trading, I’ve seen the incredible power of regret. There’s a lot of talk about fear and greed in trading, but the power of regret is often overlooked. Some of my own worst trades, and those of my clients, often have a ‘regret from missing a prior opportunity’ component. When I finally finish my book on the psychology of financial risk taking, I will include much about this overlooked but very powerful emotion. (more…)

3 Mistakes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1) Becoming Overly Focused on P/L During Trading – Watching your profits or losses tick up and down during a trade; becoming anxious about P/L and letting P/L, not a trading plan, dictate when you get out of a trade. It’s a recipe for performance anxiety. By focusing on process goals rather than P/L, you can stay grounded in good trading practices and minimize performance stresses.
2) Trading Much Larger After a Series of Winning Trades – It is common that traders become overconfident after a series of wins and decide to increase their risk by a factor of two or more. This often leads to large losing trades that wipe out much of the profit, generating frustation and discouragement. Just as it doesn’t make sense to plow into a trade after a large move has already occurred, it doesn’t make sense to plow into risk after a series of profitable trades.
3) Failing to Learn From Losing Trades – Traders often want to put losses behind them and not dwell on negatives. The downside is that they don’t learn from their losses and thus miss opportunities to understand what’s happening in markets and what they might be doing wrong. This is especially important following a series of losing trades: either you’re not seeing the markets well, or you’re not acting well on your perceptions. Both scenarios offer learning opportunities that can help generate profits down the line.
It’s common to think of trading as a stressful occupation, but much of the stress is self-generated. By staying focused on “best practices” in trading, we minimize fear and frustration and build confidence in our development.

Go to top