Conditions for getting started on how to become a successful trader: pt 2.
The second reason is psychology. At this point, we should dwell in more detail.
The fact is that the market is a very peculiar environment, incomparable with anything in ordinary life. The market movements do not obey any laws, they never repeat exactly (although similar price formations appear), every moment on the market is unique, they can go according to fundamental factors, or they can go against them. The market is an environment with constant uncertainty. All this can be described in one word - a paradox.
Emotional pain and financial failure are characteristic among traders because the principles, attitudes and conclusions that we apply in everyday life often lead to the opposite effect in the market environment. They do not work. Without knowing this, people begin to trade in the markets without even knowing what it means to be a trader, what skills need to be developed.
I am sure that there are no traders who would not enter into the transactions too early before the market issued an entry signal, or too late after that. Which trader did not convince himself not to take a loss and as a result ended the transaction with a greater loss than he expected; or exited a profitable trade too early; or being in a profitable transaction, did not take profit and as a result ended with a loss; either moved the stops closer to the entry point and remained out of the market when the market flew in his direction. This is not a complete list of mistakes constantly made in the market.
But these are not market-induced errors. The market is neutral, it simply gives out information about itself, which gives us the opportunity to act. And that’s all. The market has no effect on our ability to perceive information or control our decisions and actions. The above errors are the result of a misperception of the market. Improper perception generates fear instead of confidence and consistency.
Learning to fully accept risk is not easy in any environment, but it is especially difficult in the market. What do we usually fear (except fear of death or public opinion)? We are afraid of losing money and are afraid to be wrong. Admitting that you are wrong and losing money is very unpleasant. But, when trading, we are faced with these opportunities almost constantly. Trading is a fundamental paradox: how to remain disciplined, focused and confident in the face of constant uncertainty? When you learn to think as a trader, you can achieve this. Learning to redefine your actions as a trader in such a way as to fully accept the risk is the key to developing the thinking of a successful trader.
When you develop the risk-taking skill, the market will stop generating information that is painfully perceived. And if market information is unable to cause emotional discomfort, then fears go away.
I think that it’s easier to not tell the difference between successful traders and the rest. Successful traders are not seized with fear. They are not afraid because they have developed a flexible attitude to what is happening in the market, which makes it possible to enter and exit transactions depending on the information provided by the market. In addition, they have developed the ability to remain collected and avoid negligence.
Ninety-five percent of errors in trading come from your attitude to such concepts as: being wrong, losing money, skipping a deal or not taking part of the profit.
It is extremely difficult to realize that the source of the problems is in our respect. A lot of thoughts and perceptions affecting our trade are the result of our upbringing and traditional perception of the world. It is so strong in our minds that it does not occur to us that the reason for the failure is within us. It is natural to find an external cause of failure - the market is to blame. If we do not understand how our thoughts or beliefs affect our perception of market information, it may seem that market behavior is the cause of inconsistency. The result is the idea that in order to avoid losses and become consistent, you need to study the market more.
This logical construction is a psychological trap that most traders fall into sooner or later. This approach does not work. It's just that the market offers too many variables that need to be considered. In addition, market behavior has no boundaries. He simply can do anything at any time. Each trader is actually a variable affecting market behavior.
This means that no matter how much you study market behavior, no matter how great an analyst you are, you will not be able to predict every market step that can rob you of your money and prove that you are wrong. Thus, if you are afraid of losing money or are afraid of being wrong, the amount you have learned about the markets will not eliminate the negative effect that these fears have on your ability to be objective or to act without hesitation. In other words, you will not be confident in the face of complete uncertainty. The harsh market reality is that every trade has an uncertain outcome. Until you learn to fully accept the possibility of an uncertain result, you will consciously or subconsciously avoid any painful situation for you and this will lead to many mistakes.
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