Do not over trade

I think that the psychological aspect of the problem is similar to that of many gamblers. When they have winnings, they tend to view those winnings as playing with “house money”. When you make your living trading you cannot afford this view. This money is not to be viewed as winnings but earnings. Like in the sports - It is easier to get to the top, but staying on that top and defending it is not so easy. Defending your profits may not be the fun part of trading but it is the indispensable part of your activity in order to be consistently profitable.
A difficult lesson to learn is to consistently make the same trades. The mean is, that a good trade is a good trade in its own right, no matter if you are up for the day, down for the day, or merely treading water.
You have to know when and how to enter, but if you don`t know/feel how much is enough for that trade/day/etc you`re in a wrong direction yet.
Another situation linked here is always increasing the goals, when reached $300 you want to try for $500 when there - want to get to $1000. And if you choose the point to stop how will you ever grow and make more?
As wrote before:

Put aside daily financial goals for a while. If you have a goal to make $nn, or $nnn per day, the hidden mind status is that you can control the markets and the opportunities. Markets are not that cooperative in the beginnings.

This is called chasing. Chasing means an emotional exercise which allows the market to have its way with you and setting goals, increasing them are good things. But this should not be done on the fly. Consistently meeting expectations day after day is the best choice. If you don’t make your monetary goal on any single day, it is OK, don’t obsess over it. That is the downfall of most traders - trying to force trades to make a certain amount instead of waiting for the trades to come naturally.

I like one very simple exercise. Try to imagine the difference between these 2 processes:
1. taking a nice income from the market,
2. accumulating capital.

1 Comment »

  1. Comment by passing-by

    Three motives for which we live:

    1. For the soul.
    2. For the mind.
    3. For the body.

    No one of these three is better than the other, all are alike desirable, and no one of the three can live fully if either of the others is cut short of full life and expression. It is not right or noble to live only for the soul and den mind or body, it is wrong to live for the intellect and deny body or soul.

    Guess now what a trader is doing when he is over-trading? It is doing this for his soul?
    For his mind or body? At least he/she should ask this in the moment of feeling is in oveertrade…

    Great post.
    Thanks.

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