Trading Psychology – Do You Hate Or Fear Losing Money?

One cannot trade with profit as the primary aim. With money as the motivating element, this trader is bound to make a lot of mistakes and commit many trading sins. Each winner and each loser amplifies his sense of success and failure and he will never be able to trade well. On that note, my take is that the trader should aim to trade well each day, rather than to profit. The money will come when you make no mistakes.

Some traders hate to lose money. When you have a hate for losing, you will do whatever it takes to make sure u do what is right. As traders, we all know that we can never avoid losing trades. That is the cost of running the business. And when you hate to lose money, you tend not to take random trades, gamble, revenge trading, cherry picking, moving stop losses or commit other trading mistakes that will potentially make you lose unnecessary money. Over the long run, this trader will be profitable as he will stick to his system and rules.

Some traders fear losing money. A person that is afraid to lose money should not be trading. His fear stems from the fact that money means too much to him. As the fear is too strong, when a trading signal comes, and knowing that there is always a chance that this trade will turn out to be a losing trade, he will rationalize ways to avoid taking the trade. Such trader will tend to cherry pick his trades; take quick profits and not allowing the good trade to reach its full potential. He may also cut losses prematurely in order to avoid ‘a bigger loss’. All these mistakes will affect his trading account in an unimaginably large extent.

Now, imagine you bought a unit at $1 a share, and you projected it to reach $1.80. It went to $1.35 and the price began to stagnate. Price hovered around $1.31- $1.35 refusing to move further due to a significant resistant level that was established last week. As this happens, doubts started to manifest and you began to believe that there was not enough buyers and the price would reverse soon. Objectively, all the other objective parameters still stood intact, but you decided to trust your gut and ‘judgment’. You exited the trade with some profit at $1.33 and you felt relieved. A few minutes after that, price broke $1.35 and surged strongly to hit a high of $2.10.

Yes, you made some money. But this is also a form of loss when you leave money on the table. Typically, one will feel more pain taking a loss in the usual way where price turned and went against him, than such a loss where his mental weakness caused him to lose out on a very good move which he had already committed to. I believe this trader will start to get angry and began to blame himself and subsequently take some random trades to make up for the ‘shortfall’, usually ended up with a bad ending. Even if he is to make money on those random trades, it is never a good thing to be rewarded for doing wrong things. He will not be so lucky next time.

It is always an interesting journey as a trader learns about himself as he progresses. As one embarks on this career, besides arming himself with the correct trading course system, having a good knowledge of his thinking process is equally important for long term success.

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