A trader without discipline - consequences
In this article we will look at what factors affect the psyche trader and how to avoid them?
Greed
If your greed is insignificant, you will make few deals, missing many good moments. In this case, it is recommended to take up a quieter kind of business.
If your greed knows no boundaries, then you will try to make as many deals as possible, putting yourself at risk of uncertain prospects. Then it is better to play in the casino. It's more fun, and it's cheaper.
The result of greed will be the motivation to make deals.
Two types of motivation can be distinguished:
- Rational motivation - usually present before the first entry into the market in a beginner trader, as well as in the work of a professional trader;
- Irrational motivation - is expressed in the player's excitement and is present in almost every trader. However, some control their excitement, while others are slaves to their emotions and are doomed to lose.
If a trader does not have a work plan drawn up before making trades - this indicates that the person works, most likely, under the influence of excitement, rather than reason.
In order not to succumb to greed, it is necessary not to change plans during trading, unless there is an objective reason for it. The reason "I wanted to make more money in this trade" is not objective! Do not deviate from your trading plan!
Hope and Expectations
The next factor that drives a trader to make trades is the hope of making a profit. Naturally, the meaning of any work is in the amount of money received for it. However, if hope dominates over the calculation you risk overestimating your own capabilities in analyzing the situation. Hope should be in a subordinate relation to both calculation and greed. Excessive unjustified hope can lead the beginning trader to losses. If you follow the trading plan strictly, this will not happen.
Fear
Fear arises when you make a loss. Some people are paralyzed by fear: they cannot stop in time and lose everything. For others, fear makes them move and sometimes make mutually exclusive deals, which also usually hastens ruin.
At critical moments, it is better to do something than sit back and watch dreams of a bright future evaporate with price changes. Act accurately according to a plan you created before you opened a position (respectively, before fear arose) and fear will not overwhelm you.
The best cure for gambling, fear and the like is to make a trading plan and keep trader's diary.