Trading Psychology

Anybody have any suggestions for a trader who spots good setups with tech analysis but cannot pull the trigger? Any and all suggestions are welcome.

A few things could be the cause of this:

  1. You have not sufficently tested the approach or set-up you are using. Without a thouroughly tested system there is no way you can have that much confidence in your decisions.

  2. You are trading money you cannot afford to lose

  3. You are setting your risk parameters too high for any individual trade.

  4. You might be afraid to be proven wrong.


I second that!

Good post!

google “Brett N. Steenbarger”

IMHO, He offers by far the most focused and effective strategies for traders struggling with confidence and psych aspects of trading. (…tons of free essays and posts on his blog.) Trading is all about thinking after all, isn’t it?

Ari Kiev also offers valuable input, as does Mark Douglas. There’s no hurry. The market will be here when you’re ready. Best…

I’ve had the opportunity to pose this very question ot Brett on a call. His advice - which I definitely agree with - was to start off demo trading, then progress to trading very small positions, gradually building up to full size as you build up the confidence.

Don’t forget to update us on your progress!

I have another proposition, cuz I had the exact same problem when I started. Just trade. There will be alot of pain but you will get through it. It is the only way. It seems experience will mold you as a trader, of course if you have a teacher/coach, that will work too, either way tho, you will still go through the same experience, but maybe in different strokes. Believe me I went through hell(probably cuz of my personality tho :stuck_out_tongue: ) and am just starting to pull myslef out of it:D. Have a good eh!

Thank you for all the advise. I have checked in to Brett before and found some good info. I think what I need is to just trade, like Shadow said. I do have a mentor, and I am learning, but I think that the way he and I think are too different. I am looking in to other areas of learning. I took 2 bad trades last week and then made 5 pips on the AUD news last night (I chickened out but pips are pips so I am happy with the plus side). I will try and keep you all posted. On another note, anybody know a broker who gives lifetime demo in mt4?

i would also recommend you read Emotion Free Trading by Larry Levins. i found it quite good, not the best, but definately worth a read

This may sound too obvious . It’s a good idea that rather than view your profit/loss in terms of the currency try using points. The psychology behind it is its easier to handle a loss of one pip rather than a loss of $10. Same thing but different ways of viewing it.
Having said that I assume you’ve thoroughly forward tested your system and you have an account that you are comfortable trading with.

The answer you are looking for lies solely in your emotional attachment to money! As a way to overcome this attachment I suggest this:

  1. Use very little trading leverage (not margin requirement) for your account…what this means is each trade you place needs to be a small % of your trading account.
  2. Open up your stop loss and let your trade run awhile, see how this makes your stomach feel as you watch the pip total move up and down and up and down.
  3. Set your limit to 50-100 pips and let it hit your limit.

Let me give you an example of why this is beneficial for you: let’s pretend you have a $1,000 acct (used for simplicity of calculation) and you decide to throw on a 10 minilot trade…let’s assume 50:1 margin requirement…so $500 goes into the margin…you now have $500 left in the acct for the active trade…at 10 minis that is approximately $10/pip so in essence you leave yourself room for only 50 pips of movement before getting a margin call (something that is VERY possible in the forex market)…that send chills through your spine so you continue to postpone trading b/c you are emotionally attached to your $500…

Now let’s assume with the same $1000 acct you place a 1 mini lot trade…that places $50 in the account and leaves you with $950 left for the trade…in essence you have room for 950 pips before you get a margin call…are you willing to bet that a move of 50 pips (in the first example) will happen before the move of 950 pips (in the second example)? By lowering your trading leverage you give your trade more room to roam and will therefore give yourself a much better chance of lasting through the swings in this market to allow the trade to go against you a ways and then come back and hit your limit for you to take profit…

your emotional attachment to your money keeps you from placing trades that you would have made…so do your best to lower this attachment and the best way to do that is to trade very low leverage so your trades have a chance to go positive…when you have a small trade on (relative to your account size) and it goes against you your emotions don’t play such a big role, but when you have a larger trade on (relative to your account) you get emotionally attached to your trade b/c it is eating into to the majority of your account and you cannot make trade decisions based on emotions in this market or you will fail. Try these recommendations and see what happens. And just so you know my recommendations are not 1 lot per 1k it is 3 lots per 5k of account balance.