Losing discipline is not a trading problem; it is the common result of a number of trading-related problems. Here are the most common sources of loss of discipline, culled from my work with traders:
- Boredom cause a lack of focus:What market we are witnessing in October Series , Choppy market with range bound trading from 5740-5640. It makes market participants dull as market lacks volatility and excitment to give aderline rush,These are taxing times for traders and traders who are unable to contain there desire to trade pay heavy price.
- Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions- 80% of trader this is the main reason, Overlevergae and even a 1% down-move can make your account size go down by 20% and it becomes a spiral which eventually take away all your money in trading account.
- Fatigue and mental overload create a loss of concentration: As a trder you need to watch the screen for long period of time and when market does nothing traders gets bored seeing the screen. Long time spent on doing analysis without taking breaks can lead to a toll on Traders mind and will ultimately affect the trading.
- Overconfidence follows a string of successes:When easy money starts flowing in, WE THINK “I AM THE KING” which lead to ultimate disaster.
- Unwillingness to accept losses after the trade has gone into the red- Trader was 10K positive and suddenly spike down came and took away all the profits, After this an emotional traders gets involved in “Revenge Trading” fightinng the market to give back his profits and lead to further losses.
- Trading on a Strategy or trading system which has not been back tested thoroughly in all sort of market conditions.
- Personality traits that lead to impulsive and low frustration tolerance in stressful situations:Psychological research suggests that some individuals are more impulsive than others and less conscientious about adhering to plans and intentions. These personality traits often are accompanied by stimulation-seeking and a high degree of risk tolerance: a deadly combination.
- Performance pressures,and increased personal expenses, that change how traders trade: Good traders never run after profit, they are more concerned about doing a right trade as per trading system and trading plan. Once the trade goes are per trading system money will follow consistently. Never run before money, learn to trade as per trading system
Give yourself Rating out of 10 and try to improve over it.
excellent overview….. trading i’ve realisede is also a “mental strength” exercise than just charts, figures, targets and stop losses. It takes a lot of discipline to take away profits when the trade is in the green .. and accept losses and not be susceptible to “revenge trading”…. (lovely phrase) The attitude i earlier had was that i am smarter than the market! i have realised to my loss no one and nobody is smarter than the market
I like your site always… and i used your writeup for the refernce for my study on stock market.
This is also very nice as usual Article “why Trader Lose”.
I have tring to do study on the Stock Market .. Not a huge investment as Learning is my purpsoe as of now.
I have posted today the Nifty’s Way ahead – Possibilities … Please go through and suugest if my lookout need differnent approch… i am just 2 years in the market and learning the possibilities.