Category: Trading Psychology

I attended a financial planning seminar today. The speaker , Thomas , quoted something that interest me. I feel it is rather related to our trading psychology too. He mentioned - “at point of time in life we may lose friends , lose money … but if we lose the courage - we lose everything.”

Trading is never easy. It has a long learning curve. At times we may feel we are drowning and what we need is a lifeline. Strangely enough , for many people , including myself , reaching out for that lifeline takes courage. ( perhaps I should say reaching out for the last straw …) When we feel we are drowning , all we can see is what we do not have. Pride and self ego always gets in the way of reaching out. Fear of admitting we need help or that we have gotten ourselves into trouble prevents many traders from seeking help before all is lost. Fear that we will be rebuffed or humiliated when we ask …

Hope is an very bad emotion which is destructive in your trading. How many times have you found yourself hoping that a position will move in your favour or hoping that a loss you have been riding will turn into a profit ? If you find yourself hoping that a loss will turn into a profit , then you are looking for trouble. Do not be too hopeful during trading … Cut loss and stop hoping is the solution.

Greed is what causes us to hold onto winning positions though we know that they should be closed out. Greed causes us to carry too large a position , to pyramid positions as prices move in our favour , and to ignore facts which clearly indicate that our position is wrong.

Fear is what prevents us from taking a trade when are supposed to. Fear is what prevents us from holding on to trades and riding profits when we hear rumours which move market against us temporarily and from adding to positions when the time …

My stubborness and refusal to be honest and admit to a trading loss when it was small . cost me some big and expensive lessons. Perhaps I am not alone. If you are reading this and feel you were like me before , own up and share your thoughts !

As human we always tend not to admit to our own mistakes immediately. This is defensive behaviour by nature. As trader , this self deception is also self destruction to our own profession. The simple fact of the matter is that cutting losses and letting profits run is a fundamental truth about the stock markets. This seems to be an unwritten rule. However , how many of us are really cutting losses when we realise we were wrong ? There is always excuses and special case or exception we think we can give as a reason to hang on to a losing trade. Admitting we are wrong or admiting to a failure is hard to swallow. We must end this self deception and …

When I first attended a trading seminar during the beginner stage I got to know a trader and we became friend. We met up once in a while to discuss trading. Over time the frequency of meetings and phone calls lessened and we lost touch after that. I received a call from him about two years later and he asked if I was keen to have some trading books and told me that he had given up trading and wanted to disposed all the trading materials and books. When I met him up to collect the books he told me that trading is just not for him.

Among those big pile of books that Tony gave me , “Trading in the Zone by Mark Douglas” is one of my favourites. It is a book about trading psychology. I read through it once and every now and then I still use it as a reference. I believe many traders have also read this book before.

When I first picked up this book , I flipped …