Emotional rollercoaster in trading. Which stage are you at?
"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor."
- JESSE LIVERMORE
Consider a trader named Jon, who began Forex trading with high hopes of significant profits. Jon had a solid understanding of technical and fundamental analysis, and on paper had developed a profitable trading strategy and system. However, he was not prepared for the psychological challenges of the stock market...
Phase 1: Overconfidence and initial successes
In the beginning, Jon executed a few trades that turned out to be very profitable. This initial success boosted his confidence to the highest level. He began to take larger positions, thinking he had a natural talent for forex trading. His overconfidence led to impulsive decisions and excessive risk taking.
Phase 2: Reality check
Because Forex can be very volatile, Jon soon scored a series of losses. He became anxious and stressed, and began to act chaotically and in a hurry. He opened riskier and riskier trades, and wanted to trade. Losses chased losses. His emotional state worsened, affecting his personal and professional life.
Phase 3: Seeking help and education
After significant losses and emotional turmoil, Jon realized he needed help. It was natural that he started by changing to another system, then another and another, and... Still without better results, he turned to trading psychology. He learned about typical emotional traps, such as fear, greed, trading with a vengeance "to trade," lack of discipline, and poor mental toughness. He also sought support from mentors. He learned that top-earning traders put 90% of their efforts on psychology. Similarly, in the richest trading funds - they spend huge money on psychological departments and programs to support traders. He sought knowledge on how they do it.
Phase 4: Developing emotional resilience
Jon gradually began to implement strategies to build mental toughness and manage his emotions. He learned to accept losses as part of trading, stick to his trading plan, beyond emotionally managing risk and capital, and avoid making impulsive decisions. He also practiced mindfulness and relaxation techniques to reduce stress while trading.
Phase 5: Consistency and long-term success
Over time, Jon's mental strength improved significantly. He was no longer driven by emotional ups and downs. He built discipline and learned to maintain it, and began to manage risk and capital effectively. As a result, his performance stabilized and he began to make steady profits, gradually building more and more capital.
This is a typical trader's path, and reflects the typical challenges and experiences that many traders encounter in their "trading life." Unfortunately, in most cases it does not end so positively. Traders are unable (unwilling) to jump from 3 to 4. While it is the mastery of one's psyche that is often the key to long-term success in the forex market. And you, do you like to lose or make money?
"Just as professional athletes work on their body and psyche, traders should start to learn about their strengths and weaknesses and create something like a mental gym or gym for themselves. The idea is to be technically better and mentally stronger. If I were to point out a few mental qualities of the best traders it would be the ability to focus in situations of chaos and volatility, the ability to stick to the plan despite everything, the ability to manage one's reactions to highly stressful situations (like special forces). In one sentence... Current traders face a simple choice: either strengthen their psyche and increase their market advantage, or many of them face losses and abandonment of their profession." - Dr. Dariusz Swierk
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Follow: www.tradingview.com/u/drSwierk/
- JESSE LIVERMORE
Consider a trader named Jon, who began Forex trading with high hopes of significant profits. Jon had a solid understanding of technical and fundamental analysis, and on paper had developed a profitable trading strategy and system. However, he was not prepared for the psychological challenges of the stock market...
Phase 1: Overconfidence and initial successes
In the beginning, Jon executed a few trades that turned out to be very profitable. This initial success boosted his confidence to the highest level. He began to take larger positions, thinking he had a natural talent for forex trading. His overconfidence led to impulsive decisions and excessive risk taking.
Phase 2: Reality check
Because Forex can be very volatile, Jon soon scored a series of losses. He became anxious and stressed, and began to act chaotically and in a hurry. He opened riskier and riskier trades, and wanted to trade. Losses chased losses. His emotional state worsened, affecting his personal and professional life.
Phase 3: Seeking help and education
After significant losses and emotional turmoil, Jon realized he needed help. It was natural that he started by changing to another system, then another and another, and... Still without better results, he turned to trading psychology. He learned about typical emotional traps, such as fear, greed, trading with a vengeance "to trade," lack of discipline, and poor mental toughness. He also sought support from mentors. He learned that top-earning traders put 90% of their efforts on psychology. Similarly, in the richest trading funds - they spend huge money on psychological departments and programs to support traders. He sought knowledge on how they do it.
Phase 4: Developing emotional resilience
Jon gradually began to implement strategies to build mental toughness and manage his emotions. He learned to accept losses as part of trading, stick to his trading plan, beyond emotionally managing risk and capital, and avoid making impulsive decisions. He also practiced mindfulness and relaxation techniques to reduce stress while trading.
Phase 5: Consistency and long-term success
Over time, Jon's mental strength improved significantly. He was no longer driven by emotional ups and downs. He built discipline and learned to maintain it, and began to manage risk and capital effectively. As a result, his performance stabilized and he began to make steady profits, gradually building more and more capital.
This is a typical trader's path, and reflects the typical challenges and experiences that many traders encounter in their "trading life." Unfortunately, in most cases it does not end so positively. Traders are unable (unwilling) to jump from 3 to 4. While it is the mastery of one's psyche that is often the key to long-term success in the forex market. And you, do you like to lose or make money?
"Just as professional athletes work on their body and psyche, traders should start to learn about their strengths and weaknesses and create something like a mental gym or gym for themselves. The idea is to be technically better and mentally stronger. If I were to point out a few mental qualities of the best traders it would be the ability to focus in situations of chaos and volatility, the ability to stick to the plan despite everything, the ability to manage one's reactions to highly stressful situations (like special forces). In one sentence... Current traders face a simple choice: either strengthen their psyche and increase their market advantage, or many of them face losses and abandonment of their profession." - Dr. Dariusz Swierk
If you liked this post, give it a boost 🚀 and drop a comment so we know to publish more for you. Cheers!
Follow: www.tradingview.com/u/drSwierk/