Did you know 60% of our trading losses are self-inflicted losses due to emotional and psychological problems and not due to the success rate of the strategy in use.
Surprising most traders never fail to put this into consideration and hence fight for non-existing perfectionism always. Now since you are aware of this we should go deep and look at what times your most prone to make psychological Trading mistakes to avoid losses by 60%, this will increase our winning rate and become more profitable.
Before we proceed, let me be clear, you cannot avoid all losing trades, sometimes they are just normal statistical occurrences of your trading edge. What we are talking about here are the losers that you can prevent; the ones born of emotion, fueled by brain chemistry that you are probably unaware of and that you need a planned-out course of action to deal with…
Right after a winning trade
We all have had that moment or day we made a big or more than average profits on Trading and felt that excitement. Only to end up having a bigger loss or series of losses on the next trades. Have you ever thought of why this keep on happening again and again?
This is because right after we make huge profits, we feel invisible, gods or goddesses of trading and we tend to overlook and become less keen with our trading criteria’s that made us profitable.
For a trader, this means after a winner we are more likely to over-trade and do something stupid with our trading platform because our brains are subconsciously looking to keep the dopamine high going. When riding a dopamine high attitude after a winning trade, our brains naturally perceive less risk in the market and that can cause us to deviate from our trading strategy.
So, now that you know why it’s so easy to lose money shortly after winning, it’s time to figure out how you will avoid this major pitfall in the future. The trick is to have some type of filter in place to catch yourself from making an emotion-fueled / dopamine-fueled trades. Whilst it may sound cliche to once again talk about trading plans, their importance in this matter cannot be over-stated.
What should we done, every after you have had a profitable trade don’t rush to a new trade at this times your very psychologically prone to make serious mistakes or over leveraging or slip your trading plan off because of huge ego of the last winning trade be careful don’t trade unless it’s very necessary. Take a break before taking on the next trade review your trading plan to stay in check. Do this always and you will decrease your losses and increase your winning rate.
Summary of solution to battle the tendency to over trade after winner:
- You have an actual trading strategy / trading edge that you fully understand and can define
- Don’t rush back to take a trade after a winning trade
- Check your trading criteria’s first before placing the next trade.
The best way to avoid giving back trading profits is by making sure you have no doubt about what you’re looking for as you scan the charts each day. When you reach a point of having mastered your trading strategy, you only need to build a trading plan around it and stick to it, to filter out the emotion-based trades that traders often make.
One more bonus tip for reaching to this point, before we wind up always pay yourself after a winning trade it doesn’t matter how small it will give you a sense of awareness that you’re not doing a numbers on screen game but rather a money on screen business it will make you more serious on the next decision you make.
Thank you for taking your time to read this article please if you feel like it can help someone else please don’t forget to share this and comment below for any questions. You can also check out our training programs if your facing challenges to become profitable in trading we can be of help, As they say a journey of 1000 miles starts with a single step, and if you want to stop losing money unnecessarily in the market, it’s time to take the first step on the right path.
Professional Financial Market Trader. 4 Years of experience | Author at profxtigers.com