Every trades have experienced strong emotions in his/her trading and have struggled with them. One of the main reason for erratic trading results ie. Having big loss because you stayed on the trade hoping the market will reverse or missing out on big profit by exiting early have been attributed to emotions.
Strong emotions have affected your trading. Most of traders put lot of efforts to overcome this problem by learning on technical analysis learning more and more techniques every day, attending lot of Seminar and Webinars But that doesn’t seem to matter.
Lets take a small Example
Ankit recently attended a trading seminar and he learned a new strategy and he wanted to apply the strategy in market, He does paper trading for few months satisfied with results, He now wanted to take a live trade. Ankit get into a trade during mid session as the rules of new strategy he has learned in the seminar.
Ankit took a trade in Nifty Future Long at 7860 for a target of 7920 SL 7840.
As soon as trade got executed,Every Tick increase/decrease in price is changing his emotional balance, Price going in his favor he is feeling Joy, thinking he can make 3.5K per lot ,price goes against him he start feeling STRESS as he will take a loss of 1.5K per lot..
After few minuted in the trade Ankit was not feeling comfortable, his heart is racing and muscles becoming tense, Nifty does 7880, Ankit is getting 20 points little profit, His mind is urging you to get out now—at least you will have a profit, it says.
Nifty feel down 5 points, Mind says I told you get out, Ankit held on to its never, Nifty feel down 5 more points, Little Profit of 20 points has halfed now.Mind says You cannot take loss, EXITTTT
Ankit still struggled a little bit longer try to hold on and price jump up 5 points, mind becomes insistent: “Get out NOW!” And, Ankit does. Ankit is feel relief. Whew! All that tension is over. And, Ankit made a small profit.
The relief feels good. Then, a few minutes later Nifty took off and achived the target and move above it also. A sizable profit was Loss because Ankit was mentally and emotionally hijacked.
How many times have you faced similar experiences? You promise yourself you will change but fail to follow through with your plan. Fear, or another strong emotion, gets the better of you—every time.
Same Kind of Situations are repeated
- When You have a Winning streak, You think I got the Holy grail as all my trades are going right, and than you start doing trading errors and BOOM , You lose out all your Profits.
The first step in learning, WHICH emotion is overpowering you the Most, To Understand the same I have put a Poll on Twitter (https://twitter.com/brahmesh)
You can cast in your vote and than i will share my finding on it..
Fear of taking loss & loosing capital