A common psychological reaction for traders ( when presented with a situation such as we’ve seen today ) is to jump in / make assumptions / over trade / freak out / spazz with the notion that:
- I’ve missed something so huge and now I MUST find a way to be a part of it.
- I’ve lost so much money on the wrong side of this move that I MUST place another trade in the opposite direction.
- I’ve now got this nailed down to an “absolute science “and will now look to double / triple my exposure as I’m sure to be a millionaire come sunrise.
Wrong. Wrong. Wrong.
Patience young grasshoppa.
- Yes you’ve missed something huge ( I did ). No big deal. These things happen many times throughout a year, and if you’ve survived at all – just be thankful.
- If you’ve lost so much money that you are compelled to place a “revenge trade” ( or even considering trading based essentially in your “need for revenge” – I COMMAND YOU TO STOP! – YOU ARE NOT TRADING……..YOU ARE GAMBLING.
- You made out really well and should be very pleased with yourself. Now take your profits ……go buy yourself ( and your family and friends ) something nice, and DON’T EXPECT THE SAME THING TO HAPPEN AGAIN TOMMOROW.
The psychology of trading will be the one element you struggle with the most, as most of you will likely blow your accounts long before you ever really address it – or have the opportunity to work on it at all.
You need to stay in the game…………………………… long enough to “understand the game”.