Written by Robin Dayne, an affiliate of CFRN.net. Burton Schlichter is a partner and featured broker at CFRN.net.
My specialty has been removing the emotional blocks that cause trading errors, apprehension, hesitation, uncertainty, and fear. A few common errors caused by blocks are:
- Hesitation to enter a trade or fear of not entering at all
- After an entry the deer in the headlights (frozen, paralyzed to react at all), entering too soon, closing too soon
- Trade more from defensive vs offensive mindset
- Increase size to get losses back
- Hold on to ego to prove being right
- “See-Saw” trading results – winning and losing, winning, and losing more
- Rely too much on the opinion of others rather than themselves
- Can’t seem to obtain a profitable month
- …and more
All of these errors and more are coming from hidden emotional blocks. Most traders don’t realize they are not in control, believing they are. The reality is unwanted and incorrect reactions are now being filtered through the emotional block. Many think, “Oh, I can control this” but when they really examine the errors, they soon realize they can’t.
The tendency is to blame the strategy, instructor or anything but the hidden block that is really the culprit. It is the awareness of the emotional blocks that allow the trader to realistically look at all they are doing and seek insight for how to master and manage this important part of the trade. By doing this they will see the results in their bottom line, have the ability to read the market void of damaging filters and gain the ability to fine tune their strategy increasing profitability.
Example: A confident trader that starts out winning early on has a tendency to be vulnerable to overtrading and use increased size to get back their losses. Here’s an example – They start trading and market circumstances are such, that they tend to win quickly. This sets them up, feeds the ego and creates a false confidence. They feel and start to think about all the money they’re going to make especially when they increase size. Unfortunately, the market changes and instead of winning on a regular basis, it turns to losing. When this happens, they start to think that size will allow them to regain their losses quickly. So, they double up on size, but trading accuracy is off and instead of regaining their losses they double down the losses. As this happens the trader’s confidence is severely damaged, and the emotional block is fueled by every reoccurring loss. As the block gains intensifies, the errors become more prevalent. The emotional blocking the subconscious has taken hold.
Wow this strategy really works and trading is easier than I thought. I’m going to make lots of money especially when I increase size. (Market changes) Oh, that was just a small loss, a fluke, I can get that back. Oh, that was another loss and easy to fix. I’ll get that right back. I’ll jump in here I don’t need to wait for the set-up this is what I did when I won before. Oh, that didn’t work I better wait for a proper set-up. I’m not sure if this is the right spot, I really can’t lose again. I know, I’ll add contracts here and I will regain my losses faster. (Increasing size) this is the right time to get in, oh no it’s not working, I’m losing more than I thought, I better get out. Oh no I got out too soon and look it’s going right where I thought it would, If I stayed in, I would’ve made back all my money.
Why does this happen? Confidence, certainty and consistency have all been shaken and replaced by indecision, uncertainty and fear. The emotional roller coaster has begun, and the subconscious block is building and now becomes the filter for the thought process.
Because there are many fears attached to trading based on knowledge, past beliefs, experiences, trade history, patterns, and losing and winning, the subconscious mind provides the groundwork for setting the seeds that can grow into emotional blocks, unknowingly.
New traders don’t realize they need help or know where to go and blame it on not understanding the strategy. Many traders don’t want to admit they’ve screwed up. They have been rushing, anxious, and driven by greed when they win early on. Experienced traders call for immediate help. They are more honest with what’s happening and want to reverse it as fast as possible, avoiding any more losses.
Few coaches understand the complexity and the ins and outs of trading to be able to specifically fix where the errors are coming from. There are only a hand full of coach experienced with trading have a thorough understanding of the emotional challenges and the longevity of 26 years to reverse the problems and get immediate results. Time is money in the trading business.
In the up-coming scheduled webinar “The Trading Mindset of Pros” we’ll discuss how to reverse this and re-program the sub-conscious. In the meantime, there are free tools and information on www.RobinDayne.com ……Go to the home page (top right) and take “The Emotional Trading Test” to understand your personal challenges also under “media” tab the free presentations. All the best in your trading!
Robin Dayne “The Trader’s Coach”
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2023 StoneX Group Inc. All Rights Reserved