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BTC/USD - Why Most People Lose In Trading – The Traders MindsetHello Traders, In this article, we want to talk about some educational stuff because we see so many people losing in trading. How many months or even years are you in trading? 2 months? 6 months? Or even a year or more? Most of you out there who read this article might try to find out why they make the one-day profits and the other day lose it all again. We did a lot of research on this topic and wanted to provide you all the reasons why YOU still not made it so far in trading. Let us start. For this question, we want to bend a bow and try to start at the foundation why people start to trade. Most of you out there started with trading for a simple reason: to make tons of money. The prerequisites are low to none! You simply need to open a trading account watch a few YouTube Videos on trading and et voilà you are a trader, right? Well if that would be the case, we would all lay right now at the Bahamans with a Whiskey and relax life as a rich person but trading is so much more. Unfortunately, when money comes into play as a tool to make even more money, then usually psychological factors and barriers come into play and glare us to make bad decisions. We want to share with you now some facts that might interest you and where you possibly see yourself as well. Did you ever heard about the 90-90-90 rule? – Well, this rule is often concealed by Brokers when you open an account. But it is true! 90% of the traders lose 90% of their capital within 90 days! – It sounds crazy, right? Like 90% of all traders lose almost all their capital in this short time! This cannot be true, right? – Unfortunately, it is. Now let us explain why. Well, the objective here in the financial market is clearly defined. – Achieving profits. So, every winner faces a loser on the other side! We need to understand that first in terms of understanding the profits and losses! Basically, the truth is that we will have to deal with losses sooner or later again and again. And that is the problem for new traders! An unsuccessful trader can NOT deal with losses! They tend to exaggerate with their emotions once they face a loss. Why is it like this? – Well, by losing money you have earned so hard, we become emotional. Simply, a rising account puts us in joy and euphoria. Whereas a falling account will put us in scare. If this case applies to you, you need to learn and apply the ability to control your emotions and concentrate on the substance. This will bring us into an advantageous position. We simply want to provide you an example, which you might be reflected with: Our risk behavior changes depending on our profit series. For instance, you win 3 or even 4 trades in a row and booked, let’s say, 2 percent from each trade, you made an overall profit of 6-8%. Then our subconscious mind starts to think riskier because we suddenly think that things going well and seems to be quite simple. On the other hand, a series of losses will paralyze and confuse us. We try to get away from these circumstances as quickly as possible without thinking rationally. We become impatient and in the end, lose our objectivity! And this frame of mind could fast become a doom loop! You rather need to think like a professional! That is: Preparing for the market Preparation for the trade Have rules and strategies that work Know that the market is ALWAYS right Never gamble! We are NOT in a casino. This knowledge will give us a huge trading advantage! Obviously, there is a lot more to talk about but this will give you a short introduction of the right traders mindest. Hope that helps. Cheers
BITSTAMP:BTCUSDEducation
by secrets2trade
22
BTC/USD - Why Traders Lose In Trading Part 2 -Hello Traders, As you guys liked the previous educational part so much we decided to continue with that topic. In picture 1, you can see the interdependence between fear and greed! These characteristics harm us to make good trading decisions and stay calm! This fact is purely based on behaviour finance! This matter of fact is not only within the trader, it more lays in the market and we need to understand it. Only then we will understand the fact that emotions can control us in negative ways! Therefore, it is so important to understand picture 2! Only then, we can act in any market situation calm and without any negative emotions! Whereas most of the people simply follow the path of the doom loop described in the graphic above, we need to think like first like a professional! This knowledge will give us a huge advantage! We want to show you the market behaviour. With this knowledge, we then can implement it in our trading! The lack of risk and money management hinder the trader to ever be successful. The mistake you make is simple. You have the wrong mindset. Either you act greedy or fearful. This basically leads us to the next point: Your way of thinking is too short term! You concentrate just on your current losses and wins without looking at the whole! You want profits NOW! Not later! This is one of the most emotional problems which you face! You need to think long-term! Not looking at one trade! You need to judge your trading system over time and not after every single trade. However, most of the people do this! They question themselves if the trading strategy or approach they use is profitable! Of course, you need the right knowledge to build a profitable strategy. But to this later. Basically, they end up falling in the doom loop again because they get too emotional with every single trade! More they hope on every loser to become a winner and cut every winner in the fear to become a loser! The emotional behaviour is often caused by two factors: • Wrong trading approach • Short term thinking due to impatience These two factors causing tremendous effects on your emotions! Now let us explain why. When a trader starts, as you might refer this to yourself as well, we dream to become profitable day trader right! Why? – Because the profits you can make within ONE day are huge, right? This attracts us! We want fast and huge profits! However, after you started with day trading you fast recognize that it will cause more mischief within yourself than it brings the expected good things! Let us take a minute here and explain a fact, which most of you out there probably underestimate or not even think about. What is day trading? – Well, we will skip all the basic knowledge about day trading and concentrate right at the beginning on the interesting facts. The problem with day trading itself lays in the basics. You need to understand the mechanism of day trading. As you already know, you will always trade against someone else. Or in other words, if you are holding a buy EUR/USD position, someone else will hold the exact counter position. So, a sell EUR/USD. This makes the whole story interesting because you will always have a competition! And as a trader you need to think smart who is your counterparty and what information they have. Only then you can measure if you have any chance or not in the long term! So, let us compare the different trading styles in picture 3. We trade against computer based algorithms! This makes the story way different now! We need to understand that the execution time and the reaction is way faster than we can even imagine. Additionally, emotions are also not present due to the use of computers. Now there is not only the emotions we have against us, but also the fact of the executions. If you want to become successful, you first need to control your emotions and trade disciplined your trading system. However on a time horizon this thing makes the story very difficult.
BITSTAMP:BTCUSDEducation
by secrets2trade
4