Not Being Aware of Humane Nature
So far, we have learned that trading should be undertaken similarly to any other business. There are losses as in any other business (like inventories not sold), but at the same time, it is also important to understand that trading itself is like no other endeavor. Some attitudes that could have given great results in any other task in life could have disastrous effects when it comes to trading. Some of them are listed below.
Fight! Till the End
Since we were kids, we are all taught to fight as hard as we could and do everything in our hands to achieve the desired results or get what we want.
When it comes to trading, the results could be far different. This is commonly named in the trading environment as “marrying one position”. Once you enter a position, you are convinced that it is a winner. Just as you got in, the trade goes against you and you might think “it has got to go somewhere first”. As it keeps going against you, you are still convinced that the trade is going to be a winner. Then you will probably think “operators or money makers are trying to scare us”. As your trade keeps going against you will keep telling yourself “hold it, hold it”. Then you realize the trade has gone too far. This makes it hard to take the loss, and you will probably say “I will wait to get break even, it probably wasn’t a good trade after all”. And the next thing you know is boom! Margin call….
The best thing to do in order to avoid this happening to us is to follow our trading system. Remember, the first time you violate your rules, could also be the last time you trade.
Trial and Error
This is a common practice in many tasks of life. And often it is the only way to get the desired results. Like in the scientific arena in some of the most important findings, scientists actually weren’t looking for what they found. It was the result of trial and error.
In the trading environment, doing this in a real account, will lead you to wipe out your trading funds. You cannot start trading your real account trying different indicators, patterns or systems to see if it gives you the results you are looking for, or if the system fits you.
You need to find what systems/indicators suit you before and not after you start trading your real account.
Since kids, we were taught that we should try as hard as we could to achieve an A or an A+ (100 or 90%) on our grades. Getting those results was proof that we understood any given subject. And of course some of us got a little present as an incentive to keep trying hard.
In the trading environment, this could give us the wrong idea that having a system that is right 70% of the time is an average system, when in fact is an excellent system.
This kind of thinking could lead us to an eternal search for more accurate systems (the aforementioned Holy Grail).
These kinds of attitudes might make perfect sense in any other endeavor but they complicate our trading careers. For this reason, we need to open our minds to every possibility, even if it doesn’t make sense in other areas.