A new population of tradersThe popularisation
of speculative trading activity on the financial markets mostly due to the
development of retail trading solutions via the internet, created a new
population of traders appeared on the market.
Most of these traders are non professionals that are attracted by the
potential revenue that can be acquired promptly.
The majority of beginners may think that it is very easy to make money,
especially when they are trying a broker service using a free practice
account freshly registered on the internet.
Generally, a large percentage of these traders generate a sudden
substantial performance thinking that trading is an easy occupation that
can quickly and leisurely generate great revenue out of there trading
activity. They start then thinking that market speculation might become
their key to success and wealth an activity they would put a lot of hopes
in. Unfortunately, when these unaccustomed speculators overtake this
virtual investing environment and decide to start trading live accounts
risking real money on the market, the activity becomes much more complex
therefore fluent days of outstanding day trading performance get to look
suddenly and distressingly like an old souvenir. They are abruptly
entering the pitiless reality of the financial markets.
Those fresh traders are just entering in the most difficult step of
their initiation to trading: "the psychology of trading".
Indeed it is very easy to trade when the risk is of loss does not
exist, the trader feels automatically comfortable when the market moves
against the positions entered, he can elegantly keep his focus on his
price objective and waits for the market to get moving in his direction
without his personal emotion to interfere. The decisions that have been
leading to these positions seem then to be the only direction to observe.
Emotions can be seen as the trader's worse enemies
They lead most of the time to loss as they are 9 times of a 10
orienting the judgement in the erroneous direction. Feelings generate what
Roland Barach Phd in psychology calls "Mindtraps" in his book titled: "Mindtraps:
Unlocking the Key to Investment Success". Roland Barach provides a
collection of 88 lessons explaining the pitfalls most traders can fall
into.
Many Mindtraps have been identified, such as greed, fear, paralyse by
analyse etc. A too greedy trader will have a tendency to not take his
profits and that often lead to loss. A speculator who is afraid will not
enter a trade at the best time and will miss the train as a trader who
will so much analyse that he will spend his time doing it and get
paralysed by it. All these mind traps exist in any trader, the matter is
to recognize them, understand them and try to neutralize them. This
process is base of any trader's training. Therefore if someone wishes to
be a trader he should first get to know what kind of Mindtraps could
affect his speculation activity.
A skilful confirmed trader is someone that has a strong tendency to
master his emotions therefore not letting those affect his performance.
It is possible to evaluate if a trader masters his emotions when it is not
possible to notice if he is making or loosing money by looking at his
expression. It is indeed very important to not fear a loss and accept a
negative open P&L and from times to times take losses.
The ideal trader
Following what has been described above, we could start thinking that
the ideal trader would be a machine, an algorithm not able of any emotions
like per example a black box built by some scientist that integrate
trading theories based on the past behaviour of the market by back tests
realised on it. This kind of software can work for an unknown period of
time but only generate performance during a certain portion of time and
become quickly obsolete in case of drawdown.
Perfection might not exist in trading as it is held by humans in a
market made by humans but a good profitable trading can be operated by a
trader that really knows how to manage his emotions, some people can be
already skilled for it but the best manner of reaching such a level is the
experience built by trading the market. Before knowing how to win it is
therefore important to accept the risk and master the feeling of it.
Want to test your skills ?
The
Forex is ideal to test your skills but do not forget, concentration is
essential for profitable trading, learn to control your stress levels!
