Trading losses often lead to emotional distress and turmoil. The trader may re-experience those painful memories in future trades. Trading after losses, a trader may become paralyzed and unable to enter the trade or act in other fear-based ways.
Psychology :Traders brains are wired to lose in trading.
- Thread starter new digital
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Emotional distress from losses stems from a total misunderstanding of the role of losses in trading.
One can only profit from trading by being in the market, and being in the market means some trades win and some trades lose. That is totally normal.
The art of trading is not to eliminate losses, it is purely to ensure, through sound risk/money management and strict adherence to a proven method, that profits exceed losses over time.
In this way, losses can be seen as the "overheads" in the business just like in any other business.
Bad losses are those that occur through sloppy risk management and non-systematic trading.
One can only profit from trading by being in the market, and being in the market means some trades win and some trades lose. That is totally normal.
The art of trading is not to eliminate losses, it is purely to ensure, through sound risk/money management and strict adherence to a proven method, that profits exceed losses over time.
In this way, losses can be seen as the "overheads" in the business just like in any other business.
Bad losses are those that occur through sloppy risk management and non-systematic trading.
This is exactly the way to solve the issue of psychology in trading. Nowadays a bot helps a lot in decision making while trading. For example our strategy is mainly based on bot and it is quite successful.
I absolutely agree with your statement here.
Most of the traders underweight the importance of risk management with particular regard to position sizing and risk/reward balance. I believe that this lack of estimate within the humans it's natural and can be only taken off by the use of EA, indicators or some other technology that hider the emotion to come out in front of important trading decision.
Btw Great Topic
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I wish I could say that I disagree with this but I cannot!
I would much prefer to be able to say that traders should be able to control their discipline and emotions through experience and adherence to the rules of their trading method, but I think that is seldom the case!As you say, humans are humans, and that means emotions will always tend to get in the way and that is difficult to avoid without some kinds of aids in the forms you mention.
Although I do fear that EAs are not always that reliable and, if they are, then for how long? Personally, I prefer a personal discretionary approach to price developments within the rule-set of my method, but it is still sometimes difficult to remain sufficiently detached from what is happening on the screen!
I wish I could say that I disagree with this but I cannot!
As you say, humans are humans, and that means emotions will always tend to get in the way and that is difficult to avoid without some kinds of aids in the forms you mention.
Although I do fear that EAs are not always that reliable and, if they are, then for how long? Personally, I prefer a personal discretionary approach to price developments within the rule-set of my method, but it is still sometimes difficult to remain sufficiently detached from what is happening on the screen!
Saying that traders should have control over discipline it's pretty easy, it's harder (for the most impossible) to apply this in reality.
EA helps to take decisions. By setting up your robot you can be alerted every time that something (a discretionary decision that a trader takes) happens.
EA life is as long as a discretionary trading strategy. Market changes and as the market changes traders must adapt their knowledge, strategy and evaluations to the market. The same must be done with EA
It’s our natural habit; to control my bad emotions I always do meditation; it helps me a lot during my trading sessions!
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