4 dangerous states of a trader. Obsessive-compulsive trading
Do you ever feel like there are some compulsive tendencies in your trading that might be slowing you down on the road to success? Or maybe your compulsive trading behavior has started to affect your financial situation and psychological state? Human psychology plays an important role in trading. Not surprisingly, those psychological traits that affect people in ordinary life will also determine their behavior in trading. They will either help you become a professional or break you as a trader.
What is obsessive-compulsive disorder (OCD)?
Obsessive-compulsive disorder (OCD) is a type of anxiety disorder. It is usually characterized by unreasonable, intrusive thoughts and irrational fears (obsessions, obsessions) to which the person reacts with actions (compulsions), the reasons for which he may not be fully aware.
Alternatively, a person may have only one component (either intrusive thoughts or compulsive actions), but this would also be referred to as obsessive-compulsive disorder. It can cause a lot of internal tension and anxiety, which will affect your trading results.
A lot of traders that I have worked with or just talked to have exhibited similar symptoms. Think about it, can you be one of those traders? Let's face it - we all have had moments when we were obsessed with the markets.
In this article, we will look at some of the signs that you may be too obsessed with your trading, that such obsession can significantly impair your trading results.
1. I must always be right
Do you think you should always be right? As a trader, of course you must answer no. Every time a trade goes against your decisions, you blame it on a mythical "puppeteer", market manipulators or a fraudulent broker who deliberately moved the price and tried to pull your stop. You blame others for your own mistake. The scary thing is that you never admit it or even realize it.
As a trader, you must recognize that "loss" is an integral part of this business, just as it is of any business in general. If you think otherwise, you probably are, you will try to get back at the market. In this case, your losses can multiply and cause serious damage to your deposit.
Another way to avoid losses is to don't put stop losses. All claims that such trading is part of the trading system are simple excuses. Behind them, more often than not, there is an intolerance of psychological pain from losses and desire to be right by all means. Or perhaps the reason is that these traders feel insecure and draw a parallel between losing trades and their lack of intelligence.
If you recognize your behavior as described above, keep in mind the simple fact: a high IQ is no guarantee of success in trading. There is no correlation between the level of intelligence and a positive result in trading. Rather, we can talk about a certain dependence of trading and emotional intelligence (EQ). But this is another story. You do not need to be right all the time, and no one can judge you for your mistakes.
What to do?
Unfortunately, many traders are unable to admit their own mistakes. It is an inner attitude to their own unquestionable rightness. In this case they will blame anyone and anything for their loss, up to forces of nature. Any market is a system of probabilities. This means that even the best deal can bring a loss.
The key to working with probabilities is Proper cash management.
2. I should know everything
Another classic symptom of OCD is the attempt to understand and rationalize every, even the smallest, market movement. "I have to know absolutely everything and understand everything in detail.
Such a trader studies economic news, various trading methods, trading tools and strategies, indicators and trading platforms all his free time. In his opinion, such in-depth knowledge will give him an advantage during trading. They allow to better analyze the market and understand the future price movements.
The problem is that the market is absolutely equal. Some indicators are completely contradictory to others, economic data is interpreted by the market far from unambiguously, and there is simply no universal trading system. The more you try to understand and analyze everything at once, the more you will encounter "internal conflicts" in your own analysis. So trying to listen to all the information will lead to confusion and, ultimately, to poor trading results.
Do not look for a magic trading system with a "golden" indicator and use other people's trading signals. It is much more productive to focus on what makes sense to you, to develop your own vision and read the market. There is nothing more important and valuable than your own experience. Even if acquired at the cost of losses and mistakes.
What to do?
Some traders believe that they can gain a very serious advantage by studying and considering literally every aspect of trading. The news, the economy, the political backdrop and indicators of all indicators. However, this is too much information, and it will lead to a lot of psychological stress.
Ultimately, such an approach will provoke the phenomenon known as "analytic paralysis," when a large volume of contradictory facts causes a person to fall into a stupor and become unable to make a final decision. Rely on what you understand well enough and what you are good at.
Reduce the undesirable psychological burden of making decisions.
3. I have to control everything
The third, but not the most important, problem that causes internal tension is desire to control and monitor literally every tick of price movement after opening a position. This approach can be called "microcontrolling".
The consequences in this case can be very unpleasant. With this kind of trading, it's as if you allow the market to pull you emotionally into the trade. You merge with the market, become its participant, on the one hand, without any possibility to influence it, on the other hand. This can lead to the fact that even from all points of view a well thought-out position, which can potentially bring good profits, will be closed for no reason, solely on the emotional decision.
Sitting in front of your computer monitor and "empathizing" with your open position, you can't influence the outcome of the trade in any way. But it is very easy to shake your nervous system. After opening a position, you have done your part of the work. Now let the market do its job. There is no need for excessive control of the process, which is not really under your control. It seems difficult at first glance, but it's actually doable if you find something to do outside of the market. Get distracted and do something interesting.
Another reason for wanting to control everything could be your inner uncertainty. You may have doubts about your trading system or your abilities as a trader, resulting in several unsuccessful trades in a row. Remember, a temporary loss of confidence happens to all of us, even the best in our professional field. And if the cause is even deeper, and it's insecurity in yourself as a whole person, then perhaps you should stop trading for a while and try to solve a more global problem first.
What to do?
"Micro-controlling" the market in general and open positions in particular is very dangerous. It leads to overly emotional trading.
And this is a direct road to impulse trades, frustrated trading plans, ill-considered decisions and irrational reactions. This is a direct result of the inability to psychologically "disconnect" from the market. First of all, you need to believe in your trading system and trust it. And only then invest real money in it. Remember, do you have any hobbies or interesting things to do outside the market? Turn your attention to any topic not related to trading.
4. I have to be in the market all the time
The urge to trade all the time. If one position closes, then the next position must be opened as soon as possible. This trading looks as if the market will close tomorrow, and it is necessary to earn everything today. Often such trading leads to "making it up, anticipating" a position, trying to look ahead. "Even though the trading system does not give a clear signal to enter the market right now, but the situation is developing in the right direction.
To be sure not to miss a signal, it is better to open early. This is roughly the reasoning of a trader who wants to "trade all the signals.
Obsession with trading is not as rare as one might think. The experts at Fortrader.org agree with the author's idea. The urge to be constantly in the market can cause significant damage to a trader's emotional state. Think about how psychologically dependent on the market you are? Can you fully control your thoughts and actions when it comes to trading? Or not to the fullest extent, and do you need some help with that?
To understand this, you need to answer as honestly as possible just a few simple questions:
- Do you find it difficult at work or to communicate with people because you are too often distracted by your smartphone, where you keep track of current market quotes?
- Are you late for a business or personal meeting because you can't tear yourself away from your computer while monitoring an open position?
- Can you rest on the weekend when the markets are closed, or do you need to be constantly at your computer, planning trading for the next week?
If these or similar questions resonate with you, it's time to think about it. Remove the trading platform from your smartphone!
Trading is a rather paradoxical thing. It is not an activity in which there is a direct correlation between the result and the number of hours spent on it. Rather, we can talk about an inverse dependence. Here as nowhere else brightly works the famous Pareto principle, according to which 80% results bring 20% actions. In other words, "less is more.
What to do?
It's very easy to become dependent on the market and let it control your thoughts and emotions. When the market is the only thing you are able to think about, it is very bad.
Such dependence on the market, in its essence, is not much different from any other dependence, and this is already a very dangerous situation.
Overcoming such an addiction can be a very difficult task. Developing your own trading system that you trust completely can help. In addition, a clear understanding of your actions in the market, drawing up a trading plan and its implementation. Such recommendations may seem banal and hackneyed to some. Perhaps, I agree. But they have not lost their relevance. Good luck in trading!
Good article. I have read several books on the psychology of trading, but the question of emotions in trading still remains open. Thanks to the author. I also have a positive feedback about Yulia Nikas from what I have read.
Advisors also help to cope with emotions. At least an elementary advisor STOP and Profit, significantly improve the trade and remove the emotional, mental load. Automated robot based on your strategy will help you in trading. Sam mastering it. Prepare in advance, because it will take a lot of time: writing the terms of reference, agreeing the terms of reference with the programmer so that he understands everything, writing the first version of the EA, testing the first version, debugging, correcting errors. Testing of the second and third version of the Expert Advisor, Optimization of parameters of the Expert Advisor. Adding new conditions and filters to the Expert Advisor. But the end result: decreased emotional stress, reduced time spending and sitting before the monitor, significant increase in profitability of trading. I wish traders success in trading. Thanks to the magazine and the author for the article. (*) Thank you for the article and thank you for the article.
https://xtrader.fortrader.org/forex-for-beginers/trading-psychology/meditaciya-dlya-trejdera.html
Alexey's new article on how to be stress-resistant in trading. With methods.