Forex Mistake #2 – I Against I

Why Fighting With Yourself could get you Broke?

I have probably put in thousands of hours staring at charts, comparing indicators, trying different strategies, changing settings and doing everything I could to find the best possible strategy. Nothing was good enough, I always felt I needed to improve something and I was constantly thinking there’s a better setting I have to find. In a way I was right, but the thing I needed to improve wasn’t the strategy, it was my mindset. Took me long enough to figure that out.

 

How this Duality could get you Broke?

No matter how good the strategy is, if the trader cannot follow it, it becomes useless. The big mistake I was making was trying very hard to put together a sniper-accurate strategy but then failing to follow it. During back-tests, all the trades were taken exactly by the rules, but in real time trading, I always anticipated something, whether it was a stochastic crossover, or a signal coming from another indicator, thinking “Ah, it will cross after I enter the trade”. Of course, sometimes it crossed, other times it didn’t so actually I wasn’t trading my strategy, I was trading a simplified version which didn’t include all the rules I had while back-testing. And I was doing that because I was impatient, I was afraid of missing the move… God forbid I would leave some pips on the table. I was always trying to grab all the pips in a move, getting angry if price would continue to go in my direction after I closed my trade at Take Profit. One part of me was happy I hit TP and the other was saying “Yea, but you could have taken more…” The greedy part of me, obviously.

 

Greed wasn’t the only problem and whenever I had an open trade, I had mixed feelings: should I move my Stop Loss to break-even, should I move the Take Profit further away, should I close the trade now, with a few pips profit, or a few pips loss? Hmm, questions, questions and usually I had the wrong answer to them. For example, I decided that if price traveled in my direction for a comfortable distance I would move my Stop Loss to break-even so that I avoid a potential loss. From then on I had only two possible outcomes: either price moves to hit my Take Profit or it reverses and hits my Stop Loss. The second situation would give me a zero loss and a zero win of course. Yea, that was the plan and I could execute it to a point but if price moved towards my Stop Loss after I moved it to break-even, I would start doubting my decision. Ah, maybe I moved to break-even too soon, maybe I should have waited a bit longer… maybe this, maybe that. The entire mental struggle usually ended with me moving the Stop Loss in negative territory and price hitting it. Then remorse followed: “Ah, why didn’t I leave the Stop Loss at break-even? Why didn’t I even put it there in the first place if I was going to move it anyway?”

 

Most of my problems ended once I’ve realized that I am the only one who is holding me back and that the psychological aspect represents about 50% of trading success. And another very important thing I found out about me: when price is between my entry point and my Stop Loss (in negative territory), the prevailing sentiment is hope. Hope that price will eventually go my way. When price is between my entry point and my Take Profit (hence in positive territory), the prevailing sentiment is fear. Fear that it will reverse and my potential profits will be wiped out. Now let’s think about this: hope is a cozy feeling while fear is unpleasant. This means that I like having my trade in negative territory and I don’t like having it in positive territory due to the feelings triggered by the respective price position. I wonder, if that’s how it works, wouldn’t it be possible that somehow the subconscious part of the mind is working against me (and other traders), affecting my decisions in order to spend more time basking in a sentiment of hope rather than cringing with fear…?

 

The Lesson Learned

Keep calm and take over the world. Or keep cool, or be indifferent to where your trade is. If your trade is opened according to your rules and you have clear Stop Loss and Take Profit in place, just leave it. Don’t look at it, don’t interfere because most of the times interfering will only get you more headache and possibly more losses. Learn from my mistakes and let the trade follow its course.

 

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