Lets discuss the last 3 days price action in Nifty.
Nifty closed below 8577 on Friday, You went short hoping to make a 100 points. Monday market continue to trade below 8577 but suddenly reversal come and it start trading above 8577. You have decided if it close above 8577 for 1 hour i will close the trade. It sustains above that than you think market is bearish and lets wait for the close above 8577 for exit. At 3:20 price is comfortably closing above 8577 , You think its just one of scenario as market is doing time correction and it will come down, So Hold on to losing trade. And Yesterday it was a Big Zoom and now we are up more than 200 points from 8577. But you are holding to losing trade hoping it will come down.
Another possible scenario is you exit at 8577 but do not go long and watching this rally from sidelines as last time you went long it did not move aggressively.
Does the above 2 trading scenario happens with you quiet often.
In Both scenarios You were not able to take quick action based on your trading plan Failing to Pull the trigger,You think to yourself something like: “I’ll let the market run its course because I don’t think it can possibly keep going with how far it’s already moved, I’m not going to get in here” etc.
Let me tell you, the above scenario is something many traders experience in there trading career.
First, let’s discuss what tends to happen to traders who face this problem…
Trading can be difficult because each trade and market scenario is going to be unique. As a trader we need to make our self understand every trade is random in nature and outcome of 1 trade should not impact the outcome on the next trade. It take lot of training to think like this.
Trending markets is where the maximum money is made but this is what most of traders miss. Most of traders suffer from I think so Syndrome “This market has fallen (or risen) so far in this short space of time it can’t possibly go any further”, market is forming higher highs or vice versa but we convince ourselves that it can’t. This is classic analysis-paralysis, and we miss the move.
As a trader we analyze these scenarios, make sure next time it happens we will not miss it but as i told making money through trading is hardest job. Next time around we do take a similar trade but if it’s a trade that loses, we then destroy ourselves mentally. You can see how this becomes a vicious mental circle where you see a trade work out that you hesitated on, then take a similar trade and it fails, then you start getting mad / over-trading etc.
How to avoid this problem we will discuss in next article
Same mistake has been done by me . still holding 8500 strike puts 🙁
there is no profession that is easy… even a cobbler or coolies have their own break points….
hahaha… watch the rest of the serial after the break…. hope there are no commercials…
Money management & Risk management are the two important concepts mostly neglected by trader. If this two things adding with good trading system like you have then trading outcomes are unbelievable
Trading…one of the toughest yet most lucrative professions in the world wherein you are just competing with yourself only….your subjective thinking, your emotions, your past experience all join together to derail you from your trading strategy…..all traders face it…but need to overcome that asap……apka number bhi aaye ga
Always follow strict stop loss and always take trade if it is as per ur system….it is easy to write but very very difficult to execute…..worlds most difficult business is trading so u have to be like robot in trading.
this happens with me every time…..i keep standing on sidelines watching a stock perform well and finally when I gather courage to enter, the trade goes against me…now this is happening with me 90% of the times….extremely frustrating!!
Please teach me how to read technical charts….are you based somewhere in NCR ???
It look like u reading my mind …..as same thing i keep on doing…….great sir
yes exactly both these situations were happened near to me.really your lessons on trading psychology makes me some benifits by gaining knowledge in stock markets
Fantastic article reflecting and illustrating the trader’s mindset to the dot. Brameshji, big salute to you.
(Elite grp member)