Financial pits for the trader

Some lucky people earn thousands of dollars a week while working at their main job or relaxing at the resort. But not everything is as simple as it seems. As the saying goes "to achieve all this, you need to work hard."

Financial markets are a very insidious and ruthless place, in one moment you can become rich, and go broke in another. To consistently make money in the market, you need to have steel eggs, in every sense of the word.

According to statistics, about 90% of traders in the market do not earn. One of the reasons for this fiasco is not the ability to control your emotions. We all know and understand perfectly well that it is impossible to trade like that, but still, many step on the same rake, eventually ending up in financial holes.

A lot of literature has been written on the psychology of trading, but today we will talk about the two strongest emotions that traders feel during trading. This is fear and greed. Let's start with the first one.

To experience and fear is absolutely normal feelings for a person. Fear is a great motivator. As you know, market movement depends on the mood of the crowd, and fear plays an important role here.

You have probably noticed more than once when the price just fell through at one moment. This phenomenon is explained by the fact that players holding long positions, fearing a sharp reversal due to negative statistics, close deals. In this situation, the bears (sellers) add more volume to get additional profit. Further, the market falls even more, the explanation for this is negative macroeconomic statistics and the actions of the crowd.

As you can see, fear forces people to conclude a greater number of transactions in both directions.

The second driving emotion in the market is greed.

You have probably noticed that many traders, hoping to get extra profit, jump into an already leaving train. Thus, they create a stir, which in turn increases the speed of the market.

But what really happens?

Let's say the price of an instrument rises for justifiable reasons (no matter what). Traders, seeing this situation, enter the market at the market price, hoping to earn additional profit. All these traders are driven by a single feeling of greed, which in most cases brings only loss.

This happens, as a rule, due to overbought conditions, where buyers are no longer ready to overpay for an asset, which in turn reduces aggregate demand. Further, sellers are already included who open short positions, thereby creating corrective movements and reversals.

Therefore, in order not to fall into financial holes, you need to first control your emotions. You need to trade strictly according to the trading system and observe strict discipline. Try to carefully analyze your actions, do not think about deals, just follow the trading algorithm, do not fall for the tricks of the crowd.

Persistent errors

Many traders close their profitable trades before the Take Profit level. This is the fear of loss, traders explain this with one popular phrase: "Better a tit in the hands than a crane in the sky." The proverb is undoubtedly good, but it is not very suitable for trading, since here you need to act clearly according to the system. Closing trades before the due date, you lose not only potential profit, but also spoil the statistics a little.

Very often, traders simply refuse to close losing trades in the hope that the market will unfold. In this situation, not only novice traders fall, but also professionals. Therefore, be careful, better close the deal and go back when there is a signal. So more reliable.

Opening short-term deals on emotions. Do not fall for these tricks, even the most impulsive movements can turn around or adjust.

Failure to use a protective order (stop loss) is one of the grossest mistakes of traders in the whole world. Oddly enough, but it is done most by traders with experience. I don’t know why, but they don’t put protective orders on purpose, although this is written in their strategy.

Financial markets are not predictable, so always use stop loss and take profit orders. Firstly, they minimize the influence of emotions on trading, and secondly, the use of these orders gives you stability, which is reflected in the statistics.

Why do people fall into financial holes and how to get out of them?

Everyone wants to be successful and earn hundreds of thousands a month. But not everyone can do this, many simply can not cope with the load and fall into financial holes, from which they can not get out. The man himself and his feelings are to blame for all this. As we all know, financial markets are markets of sentiment. Therefore, in order to make stable money in the market, you need to have an action algorithm where you need to register everything (trading rules, restrictions, transaction volumes, order levels, how the analysis will be done, etc.).

In psychology, there is such a term learned helplessness. This is a condition when a person gives up and makes no attempt to improve his life. Typically, this fear appears in people who have already failed. You can overcome this fear only by overcoming it, the main thing will be decided on a change!