A Trader’s Downward Spiral

We are like snowballs that roll along, building size and momentum as we go. Winning leads to more winning; money creates more money. Equally, a negative sequence of events can lead to a trader’s mental ruin, as their thoughts skew to the negative. Below is a list of mental behaviors that can take a new trader out of the markets for good. Stay on the lookout for these destructive behaviors that will inhibit your growth and success as a trader.

  1. Boredom: The trader wants some action, so they initiate a trade. Trades should only be enacted when entry signals are reached and not to alleviate boredom.
  2. Pessimism: The trader starts to have a negative attitude about losing money. Be positive while you learn from your losses because this is how you grow as a trader.
  3. Frustration: Frustration comes from expectations not being met. Don’t focus on your P&L, focus on executing your trading plan.
  4. Overwhelmed: Focus and simplicity are the keys to profits. Complexity and information overload are the road unprofitability.
  5. Disappointment: Invest time in your trading plan and execute it with discipline. This will limit your disappointment when a loss occurs.
  6. Doubt: Only trade a system after you have thoroughly researched, back-tested, or studied it in real time. Trade only with proven faith in a system.
  7. Worry: Trading big is a sure path to worry, stress, and bad momentum. Trade a position size that makes it just one of many, rather than The One.
  8. Blame: Blaming the market for losses is like blaming the clouds for rain. The rain will come, you are the one that gets to choose where you are standing with the rain falls.
  9. Discouragement: If you can’t keep of the right mind set to survive losing, you will not make it to the winning. “The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” -Paul Tudor Jones.
  10. Anger: Anger generally comes when we do not get what we want. Choose your desires carefully, and understand what you have to go through to get there.
  11. Revenge: Trading to get even with a stock or the market is the most destructive thing that a trader can do. It is like a surfer getting mad at the ocean for a wave, the ocean doesn’t care about the surfer or even know that they exist. The market is neutral; you create your results.
  12. Rage: Feeling or expressing anger usually leads to broken keyboards, screens, desks, and accounts. The end is near for the trader at this stage.
  13. Jealously: When a trader unable to be happy for other trader’s profits, it is time to do some self-reflection. Good traders are not bitter people.
  14. Insecurity: When you doubt your very ability to be a trader, you have two choices: Do what you need to do to make yourself a profitable trader, or decide that trading is not for you.
  15. Victim: When your losses are not your fault, you have come to the end. When control of your trading success is handed over to someone else, the trader’s career is over.