3 Common Psychological TRADING Mistakes

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 mistake. 

 

1. FOMO 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 problem. 

 

 

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 will happen. 

 

 

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 mistake 

 

2. Revenge trading

 

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 with yourself. 

 

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 the market. 

 

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 income now,

 

 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.

 

3. Gambler's fallacy



 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 row. 

 

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 winners.

 

 

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 subscribe button below and also be sure to check out our three free video series these videos will help your training tremendously and they are completely free. All you have to do is go to our website and input your email and we will send you the three free videos. So I will see you there.