Here is a sequence I observe among many losing traders
Trading Day begins with uncertainty. The trader isn’t having any trading plan, Just saw global cues but not sure which way the market is going, but feels the need to make a trade. Instead of sitting back , making a plan and let the level to come to initiate a trade , the trader is leaning forward, felling impulsive to take a trade.
The market moves higher and trader feel he is left out in this current move, and the urge to enter is so overwhelming followed by frustration of missing a great move. The trader now expresses frustration, “I should have bought there.”
The market comes down, then up.Consolidating the gains of the recent move. Suddenly the market move up one more time and the trader can’t take it any more and jump into the market without confirming. He is doing urge surfing, trading based on urge not on his trading system.
There is no profit target or stop loss articulated. This is not a trade designed with good risk/reward parameters, because there *are* no parameters. This is a trade basically an impulsive trade taken “TO BE IN MARKET”
The market suddenly reverses and retraces its recent gains. Now the trader either has to get out with a loss or hang in there and hope for a reversal. His frustration builds, leading him to continue his over trading, and making it more likely that he will stick with–and even add to–losing trades.
Most of retail trader, trades not to make money but more to satisfy EGO and EMOTIONS. Once he becomes attached to the need to trade and make money–most of traders will only look t find top and bottom of the market, They are not much bothered about the move but more intrested in catching the top and bottom of market, When they miss it they try to satisfy their ego by giving 100 of excuses and finally when the margin call trigger need to exit the market. And the cycle keep repeating again and again.
How to get Rid of these bad trading habits
- Develop a trading strategy
- Develop your trading rules
- Practices them again and again till they are itched in your subconscious mind
- Mentally rehearsing trade again and again.
- taking a break during the trading day after Loss
- Trading in your comfort zone
- More you know about yourself better trader you will become.
Our survival brain evolved to help us survive our early development. We needed to react very quickly to physical threats. As a result, the survival part of our brain can and does react many times faster than our neo-cortex or the rational part of our brain. This has been called “brain hijack,” or at the Mind Muscles Academy, we call it a “Downshift.”
In this state of “Downshift” our survival brain trumps everything else. Our brain chemistry shifts when we are in this survival mode.
However, because of neuroplasticity, we can change our survival reactions. This isn’t a trivial process, but it can be done with an understanding of how our brain works. My process is first….awareness in real time….acceptance of what we discover…and finally creating new neural connections, that with repetition can replace impulsive trading decisions.
This path requires the ability to step into this future state as safe, since the survival brain will fight it all the way if it feels this new state is a threat. The best way to accomplish this is with exercises, simulations and visualizations that my students have used successfully.
We teach the three Golden Keys in our course. The three Golden Keys are: