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Trading Psychology Mistakes – How Your Mind Tricks You To Remain A Losing Trader 

Last Updated: March 21, 2022

By Rayner Teo


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In today’s episode, you’ll discover the psychological pitfalls to avoid so you’ll stop being a losing trader.

So listen to it now…


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Hey, hey what’s up my friend?

In today’s episode, I’ll talk about trading psychology mistakes – how your mind is tricking you to become a losing trader.

There are a few things to be aware of…

Mistake #1: F.O.M.O.

(Otherwise known as the fear of missing out.)

So what happens is you look at your chart and you say:

“Oh man, what a huge bullish breakout! Look at the size of the candles, look at the bullish momentum!”

And what do you do? You buy it because the market is so bullish and it seems likely to go up higher.

But the problem with buying after the market has made such a huge move within a short period of time is there’s no logical place for you to set your stop loss. Because the nearest swing low is quite a distance away.

You wouldn’t set your stops based on that nearest swing low because the stop loss is too wide. So you end up placing any random stop loss on your chart, maybe 50 pips, 100 pips or whatsoever.

As long as you have a stop loss, you feel safe because there’s something there to insure that trade.

But the thing is…

The market doesn’t care where you set your stop loss. It’s just going to do what it’s going to do. And more often than not, the market will do a pullback. After moving a lot, it needs to take a break.

And because your stop loss is at a random level, it’ll likely get triggered on a pullback.

So yes, you can get the trade direction right, but if your stop loss is at a ridiculous, random level, then you’re still going to get stopped out anyway.

This happens very often when you have the fear of missing out and you’re chasing the markets, so you’ve no logical place to set your stop loss. When a market does a slight pullback, you get stopped out.

And that is the first mistake – fear of missing out.

The key guideline for you is that if the market looks really bullish, and your heart tells you to get into the trade before I miss the next wave, that’s probably too late to enter the trade.

Mistake #2: Increasing risk based on your feelings

The second mistake that traders make is when they feel good, the trading set up looks good.

“Oh man, all the stars are aligned, the moon, the sun, everything’s all coming together. Let me put on a larger size! Let me risk more per trade!”

Maybe you usually risk 1%, 2% on a trade, but this time around because everything looks good, you risk 30%, 40% of your account on that one trade.

Here’s the thing…

No matter how good a trading setup looks, no matter how many stars are aligned, I don’t care. There’s always a probability of a loss.

If you are going to manipulate, your risk management based on how you feel, then if that trade ends up being a losing trade, you can imagine that you’re going to lose a huge chunk of capital – 30%, 40% of your capital just wiped up based on a trade that “looks” good.

You could be executing your trades correctly for the past 20 trades accumulating little gains along the way. But because of that 1 trade where you feel good, you over-leveraged and over-risked, so that 1 losing trade wiped out all your gains that you’ve earned.

Can you see where I’m coming from?

So mistake 2 – don’t put on too much leverage based on how you feel or how good the trading setup looks.

Every trade has a normal distribution between wins and losses. Every trade has a possibility of being a winner or a loser.

And that’s why for every trade that you put on, you want to risk that same amount on every trade. If you’re going with 1% every trade, then stick to 1% risk all the time.

Moving on…

Mistake #3: Following the news

What happens is that you put on a trade, maybe you have a long trade and you read the news and think that it’s bearish news, or Trump tweeted and it’s bearish for the markets.

So you get scared because of all the breaking news, all in red colour and you start to doubt yourself. You start to doubt your trading plan. And what happens, is that you’ll start to take actions outside of your trading plan.

Your trading plan has been defined ahead of time. If you do not follow your trading plan but get affected by the news, you’re no longer following the trading plan.

Your actions are no longer consistent. And if you do not have a consistent set of actions, you’re not going to get a consistent set of results.

I know it’s difficult to turn off the news, but you have to switch it off. You’ve to trust the plan. You’ve to trust the process that you’ve already developed for yourself and just execute the trades. The news is just a distraction.

Let me share with you a secret…

If you look at news out there, any news outlet. For example, S&P is bullish for the day.

Have you ever wondered how the news person can quickly come up with the reason for that bullish news? Have you thought about it, right? How are they able to develop the reasons so quickly?

The reason why they’re able to do it is because, before the market closes higher or lower for the day, they have a template in front of them a set of news, both good news and bad news. Meaning they have reasons for both sides of the story.

So if the market closes bullishly, they will read the good news.

If the market closes bearishly, they will read the bad news.

In a way, you can say that the price leads the news. Once the market has made a move, then this news and the media will find the relevant news to fit into the price action for the day. That’s how it works.

Moving on…

Mistake #4: Following other people’s analysis

I know it’s tempting. You put on a trade and then go to Twitter or Facebook and realize, someone’s taking a trade that’s the opposite of the trade that you just did.

Maybe you’re long Gold and the person is short Gold. And the person might be a guru whom you respect.

But It doesn’t matter what someone else is doing because of 2 reasons:

1. The trading style could be different

Maybe you’re a trend follower whereas the person is a counter-trend trader. Then clearly your trade is unlikely to be going in the same direction.

2. The trading timeframe might be different

Maybe you’re trading off the daily timeframe, whereas the person is a short-term trader trading off the 5-Minutes timeframe.

That’s where your opinions and your trading directions will diverge.

So don’t be concerned about what other people are doing. The main thing you should focus on is your own trading and your own trading plan, your own trading strategy that you’ve developed.

Mistake #5: Confirmation bias

How this works is that when you’re in a trade and let’s say you’re long stocks, maybe Microsoft. But you realized that the share price is moving against you, and you’re still long.

What you’ll do is you’ll do a Google search for Microsoft’s bullish news. You’ll find bullish reasons to hold onto the trade. And I can assure you that whatever piece of news that you want to find on the internet, you can find both the good and the bad side of it.

With confirmation bias, you’ll look for bullish news of Microsoft to support your trading idea.

So when the price moves against and you’re supposed to get stopped out of the trade, you’ll still hold onto the trade longer than what your plan says. Because you’re looking for news to confirm that the initial trading idea that you had.

And if you do this, your losses will no longer be 1%, 2% of your trading account. Your losses could now be 10, 20% because you held onto the trade longer than you should, based on your confirmation bias to look for opinions to support your original idea – that’s a disaster.

With that said, I hope this makes you aware of the trading psychology mistakes that many traders make. Be aware of it and don’t commit to it.

So with that said, I’ve come to the end of today’s episode and I’ll talk to you soon.

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