The right leg is moving synchronously with the movement of the left … that way there is a movement goes. Movement forward, backward or sideways depends on both legs. Without participation of one of them there is no movement. We can only fall…
The same situation we see in trading – the concentration only on technical analysis and broker choice, without taking into account the psychological aspects of trading, sooner or later lead to disastrous results. Instead of a regular income, you have losses, instead of pleasure from work – the bitterness and disappointment.
With this article we would like to point the importance of psychology. It is not sufficient condition for success, but it’s necessary. In a few small articles we plan to name the things that help us to make the right and necessary decision and things that don’t allow us to move forward successively. We’ll talk about what we need to multiply and what should be reduced.
There are three psychological traps that can hit a trader:
• Greed. It does not allow rationally evaluate the potential of the movement and the time to take profits. We buy all the time (or sell all the time), hoping for eternal movement up or down.
• Fear of loss. It leads to skips of potentially good deals.
• Hope. It leads to the multiplication of losses, while the losses should be fixed and trader should look for new opportunities.
Our approach to trading is defined by our vision and our expectations from it. If the fear of failure prevails, we are refusing to take risks and opening the position. Our fears have a huge impact on the results of trading.
The best way to neutralize the fear of failure is to identify the major assumptions it is based on, and to refute them. Albert Ellis, a prominent psychologist, argued that behind all emotions, such as fear, stand a set of our basic assumptions and beliefs. Often these assumptions are “inadequate,” irrational, they limit our freedom of action. Instead of having to look at the problem, we avoid to deal with it, trying to deny even its existence. However, often it is useful to identify our false assumptions and change them.
The standard assumption behind fear of failure is the belief that you need to be absolutely competent and successful all the time. Ellis argued that this belief creates fear and anxiety of the traders. It is often generates wavering and self-doubt. However, if we believe that we should be competent always, we spend our precious mental energy to overcome the negative consequences of failure, rather than focusing on what we do here and now.
Traders convinced that they must be perfectly competent, spend all their time caring for what they have done wrong, and how to cope in the event of failure. These thoughts are distracting. They interfere with correct assessment of the market current state that is needed for success.
Do not let fear of failure to resist the success of your trading. You do not have to be perfect! Any experienced trader will tell you that everyone makes mistakes from time to time. And if you have a problem overcoming them, you will be so worried and frightened that you will make even more of them.
Repeat to yourself – it is dangerous to believe that you have to be absolutely competent, adequate and successful. None of traders meets this standard. Attempts to become so will lead to a greater incompetence and, ultimately, to failure.