This article was written by Dr.Brett N. Steenbarger, Ph.D., an active trader who is also professor in psychology at Behavioral Sciences at SUNY Upstate Medical University. He is also a columnist for the MSN Money website (www.moneycentral.com), Stocks Futures and Options Magazine (www.sfomag.com) and Greatspeculations.com. His famous book is ‘The Psychology of Trading’ (Wiley, 2002).
Here is one article about his observations of a number of traders who came to consult him:
The impression I get, the traders in general make 3 basic mistakes. When they come to me to find a psychological solution, the basic problem is not yet to the point of serious psychology. Since I’m also a trader, I’ve had a profit and never lost, so I can describe it thus:
1. Not having a valid trading system
They believe the problems experienced in trading are psychological factors such as undisciplined, or lack of patience. But after I ask some questions, the main problem does not have a completely valid trading system, at least according to their beliefs. They are nervous and always hesitant when trading because basically they are not exactly sure what is being done. Doubts arise because they think whether the correct trading system used will be as expected.
Continuous doubt will cause anxiety. And can you trade properly in such psychological circumstances? When I asked them frankly to say they have never backtested their trading methods or strategies, the basic part of the trading system, so how could they know the expected drawdown? If they do not know the reliability of the trading system for the past, how can expect the system to run on the current real-time price movement?
Traders who seek psychological solutions while they do not master the trading methods used remind me of a couple who are looking for psychological solutions because they can not communicate well. After I met, it turns out they are not compatible with each other, so what can they communicate?
2. Switching methods or methods of analysis
The second mistake I found was trying to change the method or way of analysis before knowing the correct application of the method to the current market condition. If you encounter such a thing, then you need to create a trading journal to find out the most appropriate method, and then you do not have to use many methods when trading. You will become less confident and tense if you switch methods. Although the purpose of trading is to gain profit in a short time, but the approach that wants ‘once gebrak’ is not applicable.
3. Always think negatively after a loss
You never lose, but may also have a profit. You always remember when you lose because you are actually afraid of loss. If you are afraid of loss, your thoughts about trading will always be negative. If you experience this, you should rest for not trading until you are sure that losses are part of the game (as often spoken by big traders). Do self-motivation until you can think positively. For the past 15 years I have been counseling and therapi on an average of 130 clients per year with this self-motivated technique.
To prevent these mistakes, start using HOTEAFOREX as your flexible trading tool.