A a large part of successful training comes from mastering your mind and your
thoughts. Let's talk about the three most common psychological mistakes traders
make and we also have some suggestions for you if you are struggling with any
of these so let's go ahead and get into it a psychological trading
Number one F.O.M.O trading promo is
an acronym for fear of missing out. Let me paint the picture for you.
The phone will Trader is typically
very optimistic about each and every trade because this trade could be the one
write something about this trade looks so much better than all the other so it
has to be the one if I miss this trade there may not be an opportunity like
this one for a while. We can all agree how silly that sound. Of course,
there's going to be more the opportunity around the corner but although it sounds silly and obvious. The
reality is that this type of thinking affects so many traitors mainly because
they don't even realize it's affecting them and it's
Cute problem because it can cause
you to do two things number one it can cause you to take every trade you see
even if it's not that good of a trade set up number two, and this one is even
worse it can cause you to increase your position size on a particular trade
because if this trade does end up being all that it's cracked up to be why
would you only want to make a few hundred or a few thousand bucks on it screw
that's chump change swing for the fence.
But what happens when this trade
turns out to be nothing special and despite how much it seems like there's no the way you can lose money on it. It turns into a losing trade and now you have
tons of your Capital invested and are sitting on a huge loss that will be
almost impossible to come back from you can see how this can be a huge
If you've ever struggled with this,
let me hit you with some wisdom from Charlie Munger who is Warren Buffett's
business partner at a recent Berkshire Hathaway investor conference Warren
Buffett and Charlie Munger were talking about how they missed Google and Amazon
because for some reason they have.
Blindspot and they didn't see the
opportunity. In fact, But our secret is that we don't miss them all. So just
think about that for a second if the best and richest investors in the world
aren't worried about catching every single investment. Then why should you be
you just have to understand that missing trades are a part of the game and it
So if this fear of missing out is
something you struggle with here's our solution for you to stay out of chat
rooms and trade alone for a week or so. And if you follow other Traders on
social media stay off of that as well basically seclude yourself and trade
alone for that. The reason I said this is because often and chat rooms or on
social media. We see others making money and by Nature, this instills a fear of
missing out in the future.
Now keep in mind. We aren't saying
chat rooms and social media are bad by any means we actually running tat room
ourselves that is nothing short of incredible and we highly encourage you to
check it out as it's a
Grateful for your trading but even
we realize that some Traders might need to break away and trade alone for a
couple of weeks if they are experiencing FOMO now during this. Where you are
trading alone. Then you likely need to stop what you're doing and become
more educated on the strategy that you are trading.
So, you know the process to find
Trey went to enter and exit then Etc because you need to have an exact plan.
Your trading strategies should not rely on the trade ideas of other people to
treat ideas of others should be a tool but not a crutch psychological training
These are the types of traitors who
can blow up their entire trading account and lose everything in just a day or
week after taking a trading loss to prevent Raiders will throw everything they
know about proper position sizing out the window and we'll trade like a madman
just to make back that loss.
Now, this may work once or twice
and you'll come out unscathed. But if you keep this up, you'll get crushed bad
and it's going to hurt the market doesn't care about you or your money and
you're going to be the one to 100% responsible for it. If your revenge trading
causes you to lose everything in your trading account. So please just be honest
And if this is something you
struggle with that all just get a grip on it before it really ends up hurting
you and the solution for this one is actually fairly simple. Here's our advice
to anyone who struggles with this first. If you're having this problem where
losses are upsetting you enough to get you to this point of seeking revenge on
just likely trading way too
big of positions in the first place. So always the position size down trade in a smaller size. This should allow you to not get so upset about losses and you'll
be able to start making decisions based on logic rather than emotion.
With any trading strategy, you're
going to have losing trade every now and then but the key is making sure your
winners outweigh your losers as Drake once said you win some you lose some as
long as the outcome is income. And if your position sizing is out of check-in
your trading out of anger or revenge in the outcome will definitely not be
if you're still having issues
with this and you know that your position sizing is in check then maybe it's
your mindset or your expectations of trading that is the problem you need to
make sure you're committing and focusing on the long-term try to look at the bigger picture and think about how long-term success is much more important
then trying to make back that loss right.
Now, this very second Revenge
trading can also be a result and expecting yourself to make money every single
day. And anytime you are negative on the day. You will do everything in your
power to turn that around and be up money on the day. Well, this is just not a
realistic expectation. You should have you should be focused on being positive
on the year.
A quarter month or at the very
least week but being positive every single day is just not reasonable as
markets fluctuate each day and you can't control that.
psychological trading mistake
number 3 gambler's fallacy. Now, this might not necessarily be a psychological
mistake, but rather just a very common misunderstanding of some basic
probabilities, and then it will cause you to make very poor trading decisions
and in some cases, this one can also compound and caused very big losses.
Now, this actually spends far
past just the trading world and as you can probably guess by the name is most
commonly associated with gamblers. We certainly don't want to tree out rating
as gambling. So let me show you how to avoid this common mistake that so many
Traders make a quick Google search will show you the definition of gambler's
fallacy, but let me put this in layman's terms that anyone can understand.
We all know that a coin flip is a
50-50 bat. So if you flip a coin 10 times, the expected outcome would be 5
heads and five tails but although it's expected that the same number of heads
and tails will show up. We know that the actual number can deviate in either
direction, but let me ask you a question. What says we plan on flipping a coin
10 times and the first five coin flips all land on heads.
What is the sixth coin flip more
likely to land on heads or tails? If you said Tails, then my friend has fallen
victim to gambler's fallacy. Let me explain the expected outcome of 10.4 is of
course five heads and five tails we discovered that but rolling five heads in a
row does not change the probability of the next coin flip. The probability of
the next coin flip is completely independent of the past results. So what is
the sixth coin flip likely to land on after five heads in a row?
The answer is that one is not more
likely than the other. It's still a 50-50 that gambler's fallacy refers to the
thinking that a series of events will somehow affect the outcome of the next
event as if there was some sort of balancing Force at work. And in this
example, the coin somehow knew that it just landed on five heads in a
So now it should have landed on tails
and this gambler's fallacy actually applies to many other parts of life as
well. A few examples are someone who flies a lot thinking they're somehow
working their way toward the crash even though each fly is independent of the
last people at the casino who see that the roulette wheel just landed on red 10
times in a row.
So now they start putting their
money on black even though the previous Pens have no bearing on what the next
Bend will be and finally, it also applies to trade and so many Freighters fall
into the clutches of this fallacy.
If you have 5 losing trades in a
row, this does not mean that the next trade will be a winning trade just
because you feel like a losing streak has to end soon many Traders tend to
increase their position size after a losing streak because they feel their luck
has to turn around soon. But the reality is you're just increasing your risk on
a trade that has the same probability of success of all the ones you just lost
money on the market does not know or care. If your last few trades were losers
or winners. Now the solution to this one is easy.
It's just a simple as understanding
it as you do now and then exercising awareness now that you understand what
gambler's fallacy is you should be aware of it and just make sure you aren't
affected by this type of thinking try and treat each trade independently from
any past trade you've made if you have a streak of losers that does not mean
the next trade will be a winner and on the flip side if you have a streak of
Trading is a numbers game and you
have to eliminate the psychological mistakes and focus on trading the numbers
once you can do that, you'll take your trading to the next level. The stock
market is not a place or weak emotional people. Make sure Your Own Worst.
The enemy doesn't live between
your ears. So our guys if you enjoyed the video make sure to click the like And
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