The main reason for trading which is common to all traders is increasing equity. Most often than not, a large percentage of traders is trapped in negative thoughts, which in turn leads to negative actions taking their accounts to zero. In this post I try to reveal the psychology and danger of a negative mind.
1. Lack of experience leads to a negative mindset.
This is a top challenge for a new trader. It is caused by the inability to trust a clearly defined system, lack of trust leads to poor execution.
2. Lack of discipline
Trading is a subjective process, when experiencing a losing streak, most systems advise closing session, which makes it difficult for a desperate trader to manage a negative trading day.
3. Desire to catch huge moves
It is obviously every traders dream to catch every big move, but for short term traders it comes at an expense either by them failing to consider current market action as most important or them acting on their false picture. Negativity comes around when a trader is stopped out too much.
4. Over trading
Again trading is a subjective process, why not take the next trade in the same day if it can get you out of a losing streak maybe turn a day to a positive day? This is a psychological bait that traps traders into an ungovernable draw down.
5. Lack of commitment
Trading is easy because anyone can place a trade, but making money is a responsibility. Uncommitted traders who fail to spend some time with the market restrict them selves from the experience required for success. Experience is not free as it requires time to gain it.
6. Excessive Leverage
Most brokers gladly provide leverage at a traders cost. Its the emotion behind a highly leveraged position that takes him out of the game. Most traders who use excessive leverage don’t know that they are classified as gamblers, their addiction is in the losing instead of the making.
7. Traders life style
Keeping a positive mindset is an exercise out side trading that successful trading wouldn’t happen without. Getting bored, getting drowsy, getting destructed and being late for session has a big chance to cost you money.
Terrible right? Its not the end, consider reading “The professional approach” by fortune.