Curious to know what’s your greatest psychological challenge to trading? Would love to offer some free help to any one who comments and shares a little about what frustrates, blocks, or gets in the way of massive success and profitability.
I’m a high performance sports coach now trading for some years. I’ve applied proven psychological methods from sports that let you make sound decisions under pressure to key points in my trading where emotions typically cause poor decisions. (Fear and/or greed anyone?) Would like to share these techniques/ideas and see how they can help the community. For each comment you’ll get a short action plan to start working on problem areas immediately.
So please share a little of your story with me, lets chat a bit, and get started making your personal action plan!
Hi. At the moment, the psychological challenge I am faced with regarding trading is chasing the market. Sometimes I do manage to “catch up” but it is an issue I’d like to avoid. Due to working Monday - Friday, 7-3:30, I have a tendency of rushing my analysis while having to deal with colleagues/patients. I have had profitable trades though, but I have realized that it does hinder my success rate, so I have started slowing down and taking as much free time as I can at work to analyze.
It will be interesting to hear your psychological methods with sports and how it has advanced your success rate
Few quick questions before going further, what kind of trading are we talking about (swing/day/scalp)? Are you trading from your phone? Using price alerts? Have you tried using pre-placed orders and not looking at the market during office hours (this was my solution, when I couldn’t look at my phone/concentrate due to work)
So lets talk about chasing price a second. Chasing price isn’t a psychological challenge per se. It’s the response to fearing you’ll miss a trade. From what it sounds like, you’ve created a situation where you bring stress (limited time availability, and obligations to clients/patients) and combine it with a fast moving market. Pretty intense. The result is a situation where you need to make a decision quick under pressure. And that means poor decision making capacity and erratic trades because you’re unable to engage the calm, rational, analytical mind in those moments.
Lets think about an analogy from sports. Take precision sports for example (golf, archery, curling, etc). Where you have to do specific movements at exact times and that result in a precise outcomes. A major source of error here comes from feeling stressed/anxious/pressured/fearful (of failure) in the moments leading up to the action. Imagine a golfer being pressured to rapidly evaluate the situation, decide on a shot, a club, the wind, the lie, how they want to hit the ball, where it should land, then prepare to shoot, and execute. They’re just not going to execute to perfection as often as they are capable of when rushed, pressured, and anxious! They need to take their time to get into the mindset to shoot and execute at a high level of consistency. So they use ways to rapidly reset their mind to be ready to execute.
Two tactics come to mind that you might want to try.
1. Create a Pre-trade Routine
You’ve already started by sitting down, and taking a moment to focus. This is a great start! It resets your mental frame and prevents you from associating stress from one domain (work, clients, limited availability) to another (fast moving market).
I’d suggest you could add a “pre-analysis/decision routine” to the 2-3 minutes before opening the charts. This could be as simple as three simple things you do right before with the aim of enhancing your calirty of what you wish to accolplish and getting into the mindet needed to carry out your analysis and make a sound decision.
Example could be to take three deep breaths, mentally recite and visualize what you are looking for in the charts (i.e. your strategy), followed by an affirmation to yourself that its OK if you do not see/enter/win a trade.
2. Replicate the higher stress situation while backtesting
In sports we plan for every single situation. What do you do if your top three players get injured in the same game? Asking three rookies to play positions they’ve never practiced when they know the team needs them (pressure!) is recipe for disaster. You’ve got to anticipate the situation and train them on the plan, then practice the plan.
As a trader you practice in a similar way. You know you are trading in a moment of extra stress. Have you tried backtesting during those same moments? Next time you have 5 free minutes open up a random pair. Scroll to a random time. Do your analysis and decide YES or NO there is a trade. Decide and close the chart. Hour later or whatever, open it again. Scroll an hour farther. Repeat the process. Did your trade pan out? If you didn’t take a trade, is there one now? Again doing the whole routine and noting how you feel. what your responses are, etc.
You are simulating the real experience. It’s the opportunity to practice noticing how you respond. To adjust the process you’re following. To know exactly what you’ll do and how you’ll play when your three best players are injured.
These are just two tactics that you can use as part of your strategic application of psychological methods and larger trading plan to bring more consistency into your decision making. Feel free to send me a PM if you’d like to talk more about your specific trading model. I’d be happy to share how I’ve built out strategies for dealing with specific situations that arise in trading.
For me my only real bad habit is getting sucked into over trading from the thrill of taking pips and then left hanging with open positions as the price action fails and reverses.
My current solution is to limit the number of open positions on any one trade.
Hello everyone, the first time that i operated in FOREX, the sensation that i felt was not only fear, also, insecure. If the candlestick up or down. Even, i hasn’t the basic in FX. A lot of Anxiety. Right now i can control myself, but always learning. Everyday… Regards
Hey Midwest! Well first great to hear you’re getting some winners coming in there! That’s awesome! And I’m a huge advocate of limiting number of open positions (personally trade one at a time).
That said it sounds like you haven’t fully developed a plan of when to take profits. The action of holding too long, or neglecting to see changes in the market can be associated with desire for more (greed), and/or fear of leaving money on the table (same coin, two sides). Both are fueled when you have a rush of winners, dumping adrenaline into your system and fueling you to keep going.
Two things you could try that might help:
Set a daily/weekly/monthly pip goal. When you hit it, stop trading. Will be a good test to see how you feel. Do you desire for more? Or are you content? Think of all the golfers who have been winning by 5 strokes on the last day of a Major…only to blow it all away. Same thing, they feel they need to do more. Jack Nicklaus says “par on the last round of a Major is a great score” because its too easy to try to earn more and more only to falter because we believe we are infallible (thanks to the adrenaline).
Spend some time and develop a clear plan for when and how to take profits. When you do this, you detach the emotions of closing a trade from the exhilaration of earning more and more. Eventually you’ll follow the plan automatically and not worry that there could be more pips out there.
Between the two I would also try some of the ideas above. Using a pre-trade routine before evaluating open positions can help you look at the market with a more sober mind. This will help understand when to close, and when to hold on a little more - just without putting gas on the fire.
My greatest challenge is to build up my strength and courage after suffering consecutive losses and starting again after all my mental stamina has been drained. I am working towards it and hopefully will overcome it one day.
Aww! This is a really interesting thread @badpandafx! It’s nice that you offer tips too. As for me, I guess my challenge is that I try to really think positive about my trades. Sometimes, the more positive I am, the more disappointed I become. Does that make sense? I’ve talked to experts here and they’ve offered really good advice regarding my emotions. I’m already working on this and trying to become just more rational. I just think it would be interesting to know what you think too.
Hey Luke! Definitely understand that, back to back SL is tough. Unlike sports you can’t “try/push/go harder” in trading. I love your idea of closing the chart. A hard break is a good reset for the mind. So lets add to that.
But first recognize that the loss is out of your control. Think about a sport where you’re down to the wire and its close, but you’re in good position to win. Then out of nowhere your opponent makes a miraculous play and wins. You feel gutted. All the hard work is gone and now what? The event isn’t over, and you play again in 2 hours. How do you mentally prepare? How do you let go of the loss?
You can’t take these feelings into the next game (trade) or it will hurt your performance. Same thing is true when we lose in trading. Maybe we take it personally (not seeing that it’s out of our control), maybe not. But regardless what can we do to mentally reset?
I personally have a routine I follow after every trading loss. It’s also something I use in the sport I still compete in. I do two things immediately after a losing trade and the onset of demotivating feelings.
Do something totally different. Trading is a mental activity. OK, so go do something physical. Run. Walk. Lift weights. Swim. Do anything that will take you away from thinking, and into the moment of physical exertion. This takes your mind off the loss and dumps a bunch of motivating biochemicals into the blood.
Side note: combining this with affirmations and visualization is also a very powerful way to reset and re-motivate yourself.
Alright so you’ve got some blood and endorphins flowing, you’re feeling better and ready to come back to trading. Now is the moment when you study, review, and revise your trading system. First review your system in full detail. What are you looking for, what’s ideal what’s not etc. Then usually I just look over trades that were winners and review the points of my system step by step. I look at the before and after results of the trade. Then I repeat for the losers, again looking at each point that fits and doesn’t with my strategy. Finally I come back to the trade of the day/week/month that got me down and I review it.
So what’s happened here? We transformed a demotivating situation into a learning, and growing experience. After you do it a few times it becomes a habit. Once it’s a habit you no longer fear the loss, because 1. you know exactly what to do after, and 2. you’ll be seeing your trading improve and faith in your ability will also be growing.
@badpandafx, thank you for the sound advice.
I do have a sound trade setup routine that includes tranquility grounding, charts, fundamentals, and technicals in that order.
I also have a proven trading methodology.
Getting out is not my issue as I can pick targets very well with over a 90% win-loss ratio. And I have most recently corrected my stop loss and time frame traded for my maximum excursion.
I simply trade to many pairs at times and scale/fade in too heavily.
ERGO all part of a not educated enough risk taker mentality and gambling coupled with greed or the desire for pushing the envelope to gain the maximum profit. Unfortunately, this is not a recipe for sound cash management.
My adopted fix as of last night after reading “Millionaire Traders” yesterday was to hit a target, in this case, 25 pips and close out. Simply stop trading. My plan is to continue this for the rest of this month. Before making any adjustment to pips or cash management.
I feel like I tend to do the same thing. At times, I tend to get ahead of myself and just jump into a trade without doing a full analysis, and truly sticking to my trading plan/rules.
@caravalpoppy I think my reply to @Luke_Ronchi might help you. Your comment is quite similar in dealing with motivation.
Do you have set plans for after a loss? Plans for after a win? Could definitely help develop this.
I’d also add that if this is afflicting you regularly it’s something that might help is focusing your self talk, and reworking your beliefs. Trading is hard, if the motivation part gets to you, refocusing on study, and using positive affirmative self talk will help. One because you’ll get better from studying lots. And two because it takes your focus off the results and puts it on something else. Approach it like you’re imagining winning a championship while you do a drill in a sport. Super powerful. Would love to hear how it goes!
Thanks @ria_rose! Just sharing some things that have worked for me, if they help you I’m just as grateful! I’m also curious what kinds of exercises they’ve given you and how they are helping?
Definitely makes sense what you say about thinking positive and feeling disappointing. Do you feel you can control your thoughts? Can you control your emotions? Usually I’d say they are quite spontaneous. And the funny thing is the more you “try” to be positive the more you are repressing the feelings of disappointment. I’m an advocate of accepting these feelings and letting them go.
In a previous response I mentioned doing something physical. This is one method to help let feelings dissipate. Beyond that, do you have plans for pre-trade, entering, during trade, exiting, post-trade etc? If you do (and I assume most people posting here do) I’d suggest looking into specifying, and focusing in on the exact task at hand. What do I mean by that?
Well lets say you have to make a shot to win a game and you can’t top looking at the score. You keep thinking “if I make this we win”. And the emotions start flowing. Its easy to say “hey don’t look at the score” but actually that’s all you want to do, you can’t stop thinking about it. You’re already comparing a future (which doesn’t exist yet) to the reality (you have to make this). So you need something stronger than “trying not to think about it” that brings you back to the present and clears your mind.
The way to refocus in this situation is to develop a planned response that tells you the next thing you have to do. This depends on the situation. I’ve already outlined a possible plan for after a loss. Exact steps that allow you to release negative emotions, and refocus toward becoming a better trader.
The same thing can be applied to literally any situation in trading. Especially if you know you are doing this little mental trickery, you can develop an action that snaps you back into a clear mind (I’m almost always going to recommend doing something physical…but it can be something that works for you). Applying this across the many many decisions we make in trading, you end up with these plans that say “what do I do IF” and you become immersed in the process of following them. So you follow them, without really looking at the results because the plans actually tell you, “ok now its time to look at results, and do analysis X Y Z”.
What I’m getting at is that you’ll be forming habits. Habits that have you attention on the task, not the result. Its what I’ve seen around called “process based thinking”. When we do this, its possible to enter into a state where emotions exist but actions become nearly automatic. So you feel like you want to hold the trade, your gut says “oh man what if it goes another 2 handles” and yet you’ve already closed it, banked profits, and are perfectly content moving along to the next step in the plan.
Sounds amazing! @midwest Tbh sounds to me like you have it nailed. To date the only thing I’ve encountered for gambling mentality is to work with fixed targets, and limited positions per period (wins & loss limits) of your choice to build habits of discipline. Its not something that translates well to my experiences in sport. I’m learning too, and really grateful that you shared your experience!
I also noticed that using fixed targets actually lets you optimize position sizes based on frequency much easier when analyzing in your journal. Maybe that’s something you also have experience with?
Nailed with the exception of gambling, Your included suggestions are helpful. I currently don’t do much in the way of sizing. So I just trade .02 lot so that not matter what I screw up I can trade another day. I limit my loss per overall account o 5% and per trade to 2% but in reality, only 50 of each, at the 1% and 2.5% my risk level is being challenged.
Fixed targets help but what really helps when doing a trade review is plotting the trade and computing the trades for the day, week or month with a spreadsheet. Tossing out the top and bottoms what’s left? to maximize my trading rage.
Your a sports coach, in another life when I was learning to run the mile, for example, I trained for distance but also did endless quarters and ran sidewalks to stretch my stride etc. At that time one of my heros was Rager Banister and another distance guy whose name I don’t recall (I’m thinking a New Zealander) that did fetlock (sp) training. Bottom line I got down to nailing under a 60-second quarter and I’m not a sprinter.
That’s all I’m trying to do trading, I have gotten carried away with the big buck picture. But the real big buck picture is steady as you go. It doesn’t matter if its 10 pips daily or 100 pips daily just consistently profitable each and every day.
I get spooked too easily. I’m basically the living embodiment of “once bitten, twice shy”.
I know I shouldn’t be. With my strategy, I’m correct greater than 90% of the time, but I either let myself get faked out by a market maker, or I take profit far too early out of fear. I think I just have a vision of how the trade is supposed to play out, and any deviation of that whatsoever makes me feel really nervous and doubt my initial analysis.
I’m literally the only person standing in the way of my success, and I just can’t seem to handle it.
It’s nice that you offer tips too. 
As for me, I guess my challenge is that I try to really think positive about my trades. Sometimes, the more positive I am, the more disappointed I become. Does that make sense? 
I’ve talked to experts here and they’ve offered really good advice regarding my emotions.