XI.1. Emotional and psychological preparation before starting trading.
So, you have decided to engage in trading. There is a significant amount of literature devoted to the psychology of trading. Let’s figure out why a trader should dig into his psychology.
1. Every trade, especially a loss-making one, forces any trader to re-examine his actions and answer the question: why did I do exactly that in this situation?
2. You start the trading day with an account of 200,000 rubles, and by the evening you have a loss of 30,000 rubles, because You’ve made a lot of deals. You feel insecure, anxious and terrified, wondering how it happened. You begin to torture yourself with questions, and this is psychology.
3. You are starting to master cryptocurrencies, you like to read stories about new coins, you pick up a few coins for yourself. Next, you gain courage and decide that the best solutions will be to bribe a certain number of coins, because the cryptocurrency market is always growing. Everyone around is just getting rich on the crypt.
You allocate $1000, buy 10 coins each for about $100. You are happy, you have managed to join the community of crypto traders. However, after a couple of days, you are surprised to find that you already have $ 800 left in your account, BITCOIN suddenly began to fall, which was not part of your plans at all. Psychology begins again – you ask yourself questions that you cannot give a definite answer to: how did it happen? I was told that the crypto market is very uncertain. In general, who promised me that the prices of the crypt will grow?
4. Let’s consider a more terrible situation. You take out a loan of 300,000 rubles. You have a business plan for how you will increase this capital tenfold within a year. You boldly enter into a fight with the market, working with the whole amount at once. Things are going with varying success, after 2-3 months there are already 200,000 rubles left from the account. You begin to realize that your business plan may have been drawn up hastily and it does not take into account a lot of additional circumstances related to psychology. You have become a victim of your own self-confidence. But nothing, you have everything under control. You start working with a 2x leverage to build up the money that has gone. After a month, you have only 100,000 rubles left. You are in despair, you do not want to approach the trading terminal, the market causes disgust and a feeling of huge deception. Who is to blame for the destruction of your dream? The market? Or are you? The question again became psychological, because the answer is obvious. You did all the deals yourself, and it’s wrong to shift the blame to someone else.
It is worth considering in advance before starting trading how you will behave if you get into one of the described situations. They are very common. In this regard, it is obvious that you are doing something wrong or will do it wrong. You will be surprised to find that as soon as you make a deal, you immediately become a little different. A new Self is awakening in you. This new You is your complete opposite: he is greedy, gambling, prone to hasty decisions.
What should be done? How do you prepare to fight with yourself during trading?
In the literature we can find a lot of advice from the most experienced traders. Most of them tend to believe that it is extremely dangerous to start a deal without a clear deal plan. Before each transaction, you must absolutely clearly establish a list of actions for any scenario. Next, we issue a request, stop for loss, stop for expected profit. In principle, nothing further depends on you. At least, that’s what most traders advise. Your strategy will work according to one of the outcomes: You are knocked out by the stop, you earn a predetermined profit.
Again: the price barely reaches your take profit and immediately rushes down and knocks out a stop. You again begin to engage in introspection and look for the reasons for such a major failure in yourself, reproaching and blaming yourself in every possible way. But what have you done wrong here?
It seems to be nothing. There was a plan, you implemented it. Taught one of the possible results. You were right, there is no mistake, at least for this plan.
Using this attitude to the transaction makes trading more comfortable. There are no culprits. However, after receiving the result, especially unprofitable, the most interesting begins: You should carefully analyze everything from the beginning:
1. Why did you choose this particular instrument for the transaction?
2. Why did you decide to make the transaction at the current moment?
3. Why did you use this particular timeframe?
4. How did you choose the entry point?
5. Why did you set such a stop loss?
6. Why was such a take profit set?
Believe me, time after time, carrying out such a thorough analysis will give its results. You will “cauterize” your actions associated with receiving a loss, trading will become more cautious, transactions will be made rarely, but accurately. As you grow professionally, you come to the concept of “algorithm” of your trading. The algorithm is rarely adjusted, only to add rules that cut off losses. The algorithm’s resistance to losses becomes higher with each transaction, your trade becomes consistently profitable.