Short Posts

Are You Making This Crucial Trading Mistake?

I will keep this week’s blog post super short.

Just imagine this:

You’ve just initiated a trade and you’re very hopeful about it.

Initially, the trade goes in your direction, but, moments later, it comes back down.

Now you’re left with a dilemma: Should I let price hit my stop or should I give it some additional wiggle room.

There are two parts to our thinking mind: A logical part and an emotional part.

You know with the logical part of your mind that you should keep your stop, let price hit it if it wants to, and just move on to the next opportunity.

But, the emotional part of your mind is there trying to pass as the voice of reason – it’s telling you that you should probably keep the trade on for this or that reason.

Since that emotional part is evolutionarily primitive, its main task is to only identify threats and rewards; hence it is strong, fast, and very difficult to ignore.

This means that if you’re the typical, run-of-the-mill trader, you will eventually succumb to the temptation to remove your stop.

In fact, 8 times out of 10, most people will remove that stop, or mess around with the rules that are there to protect them from themselves.

And that’s why trading is reputably known for its high failure rate.

When people let the emotional part of their brain take over, their trading performance is bound to reflect that.

And, here’s how it often unfolds after that: most people eventually hit a point where the pain of continuing that same reckless behavior outweighs the temporary in-the-moment micro-satisfaction it’s giving them.

So, they snap…

They vow to change their ways, and slowly they work their way out of the pit they’ve voluntarily put themselves in.

They follow their plan, remain disciplined, and after some time, they start seeing results, so they feel pretty good again.

But, at this point, they make a crucial mistake.

They use the fact that they’re feeling good as an excuse to relax their effort and take it easy.

They become complacent – which is the exact reason why they ended up in that pit of their own making, to begin with.

The key to consistency in trading is to not stop doing the things that get you consistent results.

This might seem obvious, but this yo-yo effect between emotions and logic, between self-destruction and self-construction, is by far the most common problem traders face when trying to improve their performance.

  • Why would you want to stop doing the things that gets you consistency?
  • What would happen if you kept doing those things?
  • How would your trading performance be different?

Well, first of all, it’s no surprise: your trading performance would reflect that consistency.

Secondly, it wouldn’t seem like the market is always trying to kick your butt.

Thirdly, the compound effect of your actions would kick in, allowing exponential growth to occur.

And lastly, you would get used to it; given enough time, small successes would become addictive and you would want to keep pushing in that same direction.

Seriously… think about this.

All of this is 100% possible when you finally make a firm decision to trade in your inconsistent, yo-yo-like behavior, for some damn consistency.

Don’t let your rational thinking take the backseat and your emotions the driver’s seat, just because you desperately want results now.

Again, the emotional part of our brain, the limbic system, is very powerful. It will force a decision until the logical part of our brain, the neocortex, intervenes.

But, typically, the logical part of our brain is weak and easily overpowered by the emotional part, unless we train our mind.

Most traders know very well how to trade; they know how to read charts and manage risk.

This stuff isn’t difficult at all.

But still, most traders can’t trade because the emotional part of their brain is in the driver’s seat.

It anticipates pain from losses and being wrong, joy from profits and being right; it wants to feel good right now as opposed to later, and it likely doesn’t hear the protests from the logical part of your brain.

I’m not suggesting that we should suppress the emotional part of our brain.

Not only is this impossible but it isn’t desirable because if we can’t feel emotions, we can’t decide.

But there’s a fine line. You don’t want to feel more than you think. Because when you feel more than you think, this results in reckless behavior.

Instead, you want to learn to understand your mind and work with your emotions, so that your mind enters a state of homeostasis (equilibrium) when trading.

The good news is that I teach you how to do that in the Trading Psychology Mastery Course.

In there, we work on dismantling some destructive habits that cause traders to fail.

We look at how to change your outlook, how to think in probabilities, and how to maintain emotional stability trade after trade.

We also work on relieving yourself of the trauma of past losses.

This course is not about rehashing things, it’s really about practice.

Check it out. If you’re willing to do the work, it’s possibly a game-changer.

To help you begin this journey to consistency, enter the code EQUANIMITY at checkout for a $50 discount.

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Yvan
I've been trading for a living since 2006. By merging mindfulness (an in-depth study of the mind and its tendencies in the present moment), a good trading process, and an efficient business practice, I went from being a losing trader to a consistently profitable one. Through my work here at Trading Composure, I aim at helping you do the same.
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