3 psychological errors making trading
Good afternoon Steemians brothers, today I bring you information to all traders (including myself) about 3 psychological errors that are usually committed when trading and some advice not to commit them.
Much of our success in trading depends on how we handle our thoughts and impulses... We must avoid these 3 psychological errors:
1- Fomo Trading (fear of missing out)
This type of trader is very optimistic about investing, usually thinking,"If I miss this trade, I may not get an opportunity like this in a while. The reality is that these thoughts affect these traders in a bad way without them noticing it, because this kind of thinking can lead you to two things:
Invest in every trade you see, even if it's not very good.
Increase your position in a particular trade: you may think that this great trade you have taken is giving you good profits and is the one you've been waiting for, so you ask yourself the question Why win a few dollars with it? But... What if this trade becomes one that starts to give you big losses?
For this reason we should not rush to invest large amounts of money immediately, it is advisable to start with little and increase the amounts as we are taking experience in the subject.
Advice:
- Keep you away from chat rooms and stop following other traders, as we could see that they make large amounts of money and this makes us afraid to stay out of our next investment.
2- Vengeance trading
This is the type of trader who can lose all his investment in just a few days or weeks, because after a bad trade, he will try to invest more and more in the asset to try to recover his money... It could work several times but eventually if we keep doing this, we'll lose everything.
Advice:
You're probably investing a large portion of your capital in a single asset. It is advisable to invest small amounts in several assets, this will allow us not to become so obsessed with losses and learn from our mistakes without having a major impact on our financial lives.
3- Gambler's fallacy (Monte Carlo fallacy)
The fallacy of the gambler is based on the fact that past events affect futures. This is more associated with gamblers, however we do not want to associate trading with gambling, so we must avoid it.
I'll show you an example so we can understand how it works:
We all know that if we flip a coin on the air, the odds of one side or the other are 50%. So if we throw ten times, the expectation would be that it will fall 5 times expensive and 5 times sealed.
Now I propose a game:
Let's say we flip the coin ten times and the first five times it's expensive, what's more likely to show up on the sixth coin, face or seal? If you answered seal, you're a victim of the fallacy of the gambler. The fact that it has been expensive the first five times, does not mean that there is more likely to be a stamp now, since the results of the past do not affect at all the odds of the next coin because it would be a 50/50.
Exactly the same happens in trading, many times we believe that if we come in a good streak of five good trades, this streak will end soon, so we invest more in our future trades. However, what we are doing is increasing our risk of losing in a trade that has exactly the same chances of success as others.
I hope you have liked these 3 psychological errors of trading, understanding them will help us not to fall into them.
This has been all brothers and sisters... If you liked the post please give me your vote, resteem and follow me to see my latest posts, plus you will help me to continue growing in the community :D. A big hug and greetings to all from Margarita Island, Venezuela ;)
Having been a commodities traders for quite some time, your advice is well written and most truthful. Some individuals think they know it all, til they find out the hard way. Then they may trust their brokers, when even with all the technicals and fundamentals, I have come to learn they can guess no better than you or I. So every ten years or so I have re-learn my lessons. Two years ago I thought some young techie kid could trade my bitcoin for me, as I naively thought trading crypto was different than commodities. So I fronted him 2 BTC. Only to find out he either absconded with my money or he lost it all and was afraid to admit it. Either way I am destined to add another lesson learned in life. They (the brokers, traders, analysts, governments and authorities, all like to give you guarantees because that's what you want to hear, rather than knowing and having an accurate perception of reality. That is there are NO guarantees. You are better off trusting yourself and accepting personal responsibility for all your decisions and actions and whether correct or not learn to live with it and move on to what's next. Build your life of excitement and adventure and dispense with competing with others and only compete with yourself. You will win some, you will lose some. Most importantly apply this rule. Mediocrity is NOT an option. Winners are not afraid to fail, but losers are. Failing has finally awakened me to make full effort to cure myself of the disease of irrationality, superstition, and mysticism and strive to continue to always question my thoughts and reasons and pursue maintaining an accurate perception of reality. This article above seems to be telling us not to think with your emotions, have inner self reflection and finally accept personal responsibility.
Everything you've said is correct, buddy, I agree with you. Brokers give us guarantees because that's what we want to hear, they just want to make money... It's better that we manage our own money and investments, that we learn from mistakes... I have learned from many mistakes, I have never repeated them again. In short, we must know how to control our emotions when trading, we must do it professionally.
Thank you very much for your comment @majestic-haji I send you a greeting from Venezuela and that we earn a lot of money jajaja we are reading later ;)
Good post dude! I'm afraid that I should not trade coz i have all the three sometimes :D
hahaha good friend I left you the advice there :D. thanks for your comment, gretings bro @ohmano