Trading Psychology: Why the Trader Is the Weakest Link
Most accounts are not lost to a bad strategy. They are lost to fear, greed, revenge and impatience. Here is how each one costs money, and how rules and automation take them out of the trade.
Give ten traders the same strategy with the same rules and after a year you have ten different results. The strategy did not change; the people did. Psychology is the gap between what a plan says and what a trader actually does.
Four emotions, four ways to lose
Why discipline is so hard
People feel a loss about twice as strongly as a gain of the same size. That instinct pushes a trader to cut what is working and hold what is not.
Knowing the right thing to do is the easy part. Doing it for the three-hundredth time, after four losses, at two in the morning, is the hard part.
What actually works
0/5
Five habits that protect you from yourself
Tick what is true for you. It is kept on this device.
Where automation helps
A trader on a bad day
Skips the next trade after four losses
Moves the stop to avoid a loss
Doubles up to win it back
VS
An Expert Advisor
Takes the hundredth trade exactly like the first
Places the stop every time
Never tries to win anything back
The psychology moves rather than disappears: the test becomes leaving the system alone during a losing run. That is far easier when the risk is small and fixed in advance, which is why risk comes first. See how the three parts fit together: edge, risk and psychology.
You have reached the end of this guide.It is ticked off on your route, on this device.
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