TRADER PSYCHOLOGY – TRADE EXECUTION

Technology is simply the end product to action your conviction about the market you are trading, yet in front of that screen sits a human being, and that is where the situation becomes complex.

Whether you can execute your trades is related to the amount of fear, or lack of fear, you generate at the time. Fear is always the result of your beliefs and experiences about the threatening nature of the market. What threats do the markets pose? None – if you have the confidence and you trust yourself to act appropriately under any given set of circumstances. What you actually fear is not the markets, but rather your inability to act in the appropriate manner when you need to, without hesitation.

In your dealings with the markets, you had to learn what to fear. What you learned to fear was a result of whatever you did that caused you to experience pain. Your pain was caused by your not knowing what to do next that gave you a result you neither expected nor intended. In the market, you are free not to act. The markets cannot do anything to you that you don’t allow, even if it is out of ignorance or a sense of powerlessness.

One effective way to minimize this fear and, in some cases, neutralize it, is to change your perception of the entire event. The single greatest fear producer is a loss. You enter a trade, you find yourself to be on the wrong side. What do you do? If you are like the majority of losing traders, you will wish, hope and pray that the trade will turn around, waiting one more tick, one more tick, while the loss continues to mount against you. In reality you are doing nothing.

Act fast to get out of a losing position. Keep your losses to a minimum. If you act immediately, once your criteria for a losing trade have been met, your losses will be minimized and that trade has been executed to the best of your ability.