The Fight-or-Flight response is a physiological reaction that occurs in response to a perceived harmful event, attack or threat to survival. It was first described by Walter Bradford Cannon.
In other words….. It is a defense mechanism that is important for survival, to protect oneself from harm.
Traders must constantly battle the fight-or-flight response in their trading. This usually manifests itself by causing us to freeze and do nothing or by selling or buying too quickly.
A classic example is a trader faced with a position that is declining for no apparent reason. Although a stop level may trigger and their position is too big already, they decide to fight the action and they add more shares as the stock declines. This sort of action wipes out more traders than anything else, but it is instinctive and can run wild if you don’t battle the inclination.
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