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How To Recognize The Traps In The Trading Minefield

Trading is full of surprises especially psychological ones. I will focus on how to recognize the traps in the trading minefield in this piece. The day someone decides they are going to pursue a trading, they are typically making that decision because of the potential financial prize. In other words, they are making that decision because of the perceived benefit, not the risk and effort it takes to achieve the benefit, and that all makes sense. After all, no one gets excited about risk and potential failure. What most people don’t understand, let alone consider is that they are about to step into a “minefield” of very sophisticated and strategic traps that have the potential to drain and destroy their bank account and self confidence all in one. When I look at the traders who do well and those who don’t, there is a clear observation. The traders who focus on the prize tend to lose money and never achieve their goal. The new traders who focus on the traps and risk tend to succeed and reach their goal. As always, it’s one group providing income for the other. That’s trading.

Discipline: This is a must. If you don’t have discipline in other parts of your life, don’t think you will magically have discipline when you start trading. In fact, trading will challenge your discipline more than you can imagine. From birth, we gravitate toward things that make us feel good and run from things that we are afraid of. In trading, you have to think the opposite if you want to succeed. What I mean is that we want to buy low and sell high. To buy low when prices are cheap and at a support (demand) level where they are likely to turn higher, you need to buy when everyone else has sold, after red candles, with down sloping indicators, accompanied by bad news, and so on. The act of buying low and selling high is NOT comfortable for the human mind. Therefore, you must have the discipline to follow simple rules.

Profits and Losses: People love profits and don’t like losses. This often leads to people taking profits quickly when they have them and refusing to take losses because they don’t want to lose. This action is VERY common and leads to a short trading journey. Successful traders take losses quickly when their plan tells them to and they hold on to gains until they reach their target. In other words, they plan their trade and trade their plan.

Determination/Longevity/Position Size : You have likely heard of the person who spent lots of time digging for gold. They dug a deep whole and found nothing. Dug deeper and found nothing. Dug a little deeper and found nothing and then gave up. What they didn’t realize is that they were only 5 more feet away from the gold. Someone else came in and only had to dig five feet and the gold was sitting right there. Trading is the same. You will be challenged. Trading is like a mirror. It reflects every emotional flaw you have and Murphy’s Law exposes all your flaws very quickly in trading. The journey to self empowerment with trading is a marathon, not a race so make sure you use small position while you are learning. Don’t take on risk until your demo trading proves that you have an edge that your competition doesn’t have. Then, begin your trading with as little position size as you can. Let your results dictate when you should increase that size. The problem you need to be aware of is typically, determination goes hand in hand with aggressive action. Don’t let the burning desire (determination) to reach the “prize” lead you to take on too much risk, too soon. Longevity is the key and properly handling risk with position sizing and small losses are the key to longevity. Instead, channel your strong determination into energy that allows you to follow your rules.

Some see trading as the safe beautiful garden with all its pretty flowers. Few astute market speculators realize that the pretty garden is really a mine field with deceptive traps designed to do one thing, drain your account. There are other traps in the mine field that separate the successful from the unsuccessful and I will cover those in time.

Source: Online Trading Academy


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