You might be wondering: What have sheep to do with trading? And what has trading to do with self-awareness? Has the New Age boom cast a spell over something ultimately not esoteric like buying and selling stocks, futures and currencies?
I would like to go back and take a brief look at my own trading beginnings. In specialist books dealing with the psychology of trading, there are some common trading mistakes mentioned which are made over and over again. And it seems I have done them all on my path.
Average down a losing position
There is no question, I have done it. And I have paid the price. If the market goes up like crazy such as it happens over and over again (remember the internet boom in the late 90s) you are happy to buy every pullback because you cannot loose. I mean, there is ultimately just one major direction, and that is upwards. Right? You will get so addicted to this scenario that you have no clue what to do when circumstances change.
Very large single positions
Well, when I think today of my non-existent diversification in the beginnings of my trading I can just shake my head. But who needs risk management? It is just a waste of time. Nothing ventured nothing gained. My thought process was quite naive.
No Stop discipline
Again. I have to confess myself guilty.
Overtrading
Especially traders who have a main job are very vulnerable for this kind of a psychological mistake. Whenever they have time for trading they WANT TO TRADE and not sit around and wait for the right setups for hours. They start chasing every single bad setup. Actually I have also done this quite regularly.
"Mistakes are the portals of discovery.", James Joyce
Why make all this mistakes? The driving force behind is almost always fear. Fear of losing something and fear of not gaining enough (greed.). Not the mind controls our trading, it is our emotions. Because there are a lot of people who are not able to control their emotions there is a great mass on the losing side in the trading business and a small group on the winning side.
But overall, what have sheep to do with trading? An anxious trader is like a sheep in a herd. Driven by fear, the sheep is just able to do what the herd of sheep is doing. And it does not even know that it is a sheep as well because when looking around the only thing it sees are sheep. Over some period of time it learns to deal with its fear better and better and it does not always immediately follow the herd and reacts more cool-headed. At some point, it recognizes that it has a better idea if it moves at the edge of the herd. And one day, the first day really on the periphery of the herd, what a surprise: Wait. Who are they? They look quite different from us. From us? Oh my god, I am a sheep. And look at them, let us call them shepherds, they make and we respond.
Nik Rossi has been a Professional Online Poker Player and Currency Trader for more than 5 years. He is a Yoga Enthusiastic and interested in many different topics. Visit Nik on Facebook or at Team Rakeback Account.
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