A Normal Trading Day for me as a newbie
All geared up, studied the charts, full of confidence as I spent 3 hours yesterday reading all about fundamentals and even read that new Mark Douglas book!
So confident I don’t even refer to my trading plan as I know it by heart ( or so I think I do ).
Euro made that Big move down and is going 10 pips down every 5 secs. I click the Sell button feeling so happy because with a move so strong I will make a hundred pips easily and my chair is not even warm yet. I get a bad fill as prices kept moving down but it’s ok. Theres 100 pip coming my way. As soon as i get filled, the price moves against me 15 pips in less than 2 mins. I stop smiling ( or doing my silly victory dance ) and start to feel like the top of a roller coaster wondering why i got in and what are i doing to myself. All type of emotions, anger, hope, fear, excitement all bundled up at my throat. I have a closer look at ther chart. It’s obviously hitting a very strong Daily support level. i feel nauseous and want to get off this ride. i start having self doubts. The trade continues to reverse and takes out my 50 pip stop ( something i thought would never happen ). i kick the cat and refused to kiss my wife and now everyone is also in a bad mood. Familiar?
What happened? We are supposed to check all Support and resistance levels from higher time frames, trendlines and also supposed to wait for pullbacks. Did it line up with any FIBs or confluence? Was MACD and stochastic supporting the sell? I really don’t know. I just jumped in.
Believe: Everyone’s doing it! ( you always feel better and safer when u hear this )
We are basically of a herd mentality. If u watch animal planet u will know what I mean. Like those buffalos crossing the river full of crocodiles. When one crosses, the rest just follows. Thoughtout life we gather the belief that
– there is strength in numbers,
– it is safer to stick with the group and be part of the majority.
– If everyone is doing it, it should be ok
– Dont be alone, go be with your friends
– If u are not with us, you are against us ( and we feel threatened and afraid to be an outcast ).
– Dont miss out ( just like before the crash of 1929, everyone was in the stock market making money. Even the shoeshine boy bought something. )
– How do u feel when u are in a big group and everyone is 100 metres in front and u are all alone behind? You run to catch up and be with the herd right?
We typically are conditioned to follow the crowd with the believe that it will be safer. So when u see a big move down, it tells u everyone is selling so u should follow and it is happening so fast that the herd mentality takes over and the need to follow ( just like the buffalos will jump into and cross a river full of crocodiles waiting to eat them) is so strong u just click ‘sell’ throwing away all your rules and plans.
Prices moves 110 pips in 4 bullish bars within an hour . ADR is 150 but I did not know that ( but would not have made any difference even if I did) . I wait to sell for surely there must be a retracement after such a big move. I just want to get 50 pips from the 100 pips move. It cant just keep going up? Prices never move in a straight line . Suddenly there is a red candle pulling price back 15 pips in 3 secs. That’s it, what I have been waiting for. The candle goes another 10 pips. Arrgh. I am not going to miss this pullback and click ‘sell’. Prices stop moving down and consolidate in a 15 pip range and then continues up for another 70 pips against me taking out another stop. Later I discovered there was news announcement and prices continued up the next 2 days.
Belief: ‘What goes up. Must come down’.
We have been taught this since the discovery of gravity. It is automatic and if something is thrown up, we automatically will duck as we expect it to fall right down to ground level. The subconscious pulls out this rule and we instinctively act upon it. But the market has no gravity and this rule does not apply and often prices can go up, up ,up or down, down down for a very long time. The subconscious follows rules. It does not think logically like the conscious mind so when prices goes up a lot, your instinct is to wait to sell and it sees what it wants to see. So even if u are looking at charts and SR’s it will try to justify a sell and point out only stuff that supports it.
Yes, the market will move up and down but it does so randomly. The market will do what the market will do.
I got my emotions under control and decided to read my trading plan again to make sure I was following it. I make a trade and immediately it goes in my favour. Good Job says Jarratt. 20 pips, then 30 pips. A reversal shows up. Oh. Oh. Panic time. But I have to keep my emotions in control. I take 3 deep breaths as per my training to relax and look at the charts again. It went 10 pips against me and closing without any wicks. I relook at the charts and there is no SR and I should reach my target of 70 pips. It moves against me another 2 pips. I kill the trade. Then it immediately moves back in my favour and 30 mins later I saw that it had hit my target. I record it in my SS upset and wished it was a 70 pip gain instead of recording a 18 pip. On my SS my last trade lost 50 and 70 would have made up for it. Arrrgh !!!!
Belief: A bird in the hand is worth 2 in the bush !
Basically we are told over and over in our lives not to be greedy and appreciate what we have. To gain something is better to have gained nothing. We forget about the keys of trading like risk:reward and letting your profits run as we are so afraid of losing what we have gained. If it reverses and we get a loss instead of a gain we kick ourselves ( then the cat ) and forget the lesson that we should not take losses personally and it is part of the winning game of trading. If casinos do not accept losses, they will also not be able to make the huge profits. In trading going for the 2 birds in the bush is the way but it conflicts with the rules built in our subconscious mind.
3 losses in a row. Ok Let’s stop there as I am getting depressed. Below are some other believes I had to battle.
“ You can be profitable even if you are right only half the time”
When I look at a strategy ( even a profitable one ) and see winning ration less than 50 % my mind instantly concludes that it’s a loser.
For years in school, we have been subjected to a grading system that says passing mark is 50%. Below that, it is marked in red and in some nasty schools they will even stamp a big ‘L’ on your forehead to say ‘Loser’. So a strategy that says 25% winning rate is a profitable strategy? In the subconscious 25% is Fail ( bottom 10% of class ) and if you are wrong 75% of the time, it must be a disaster. Even at work especially if u are in production, there are signs everywhere that says ‘ 0 accidents’, ‘Do it right the first time’, ‘Do it right everytime’ ,’o’ error etc.
Your subconscious being the steering wheel will drive you to failure as according to it’s believe that such a statistic should lead to failure and as I mentioned, the steering wheel will always win where destination is concerned. It is not concerned with logic that with RR of 5 to 1 it is possible. It only refers to what it believes.
The Most important Belief
I saved what I think is the most important subconscious believe that sets the financial fate of a person. Ie your belief in the good of money. Hold on. Hold on. I often hear ‘”that’s silly. Everyone loves money. Nobody has a problem with money !” But the fact is a lot of us do have a problem with money without realising it. We all need money and can see all the nice things that we can buy with it and all the people we can help but thats our conscious mind. Our Subconscious mind has believes based on what we have been told and experienced. Does the below sayings sound familiar?
‘Money is the root of all evil’
‘Rich people are jerks” ( whenever a Porsche zooms past- common expressions are ‘showoff’, ‘rich jerk’,’ who does he think he is’, ‘He thinks he can have his way just because he has money ‘ etc.
‘People get rich by cheating or taking advantage of others’
‘Wow, thats an expensive house and yatch. He must be a drug dealer or something’
“ when he became rich, he started cheating on his wife and they ended up badly ‘
Then there are the many many movies that we watch which shows the rich taking advantage of the poor.
So for most of us, our beliefs deep inside is that money is bad and rich people are not nice.
I learned about this from T.Harv Eker who wrote the book ‘ The Millionaire Mind’ ( In the book usually you get free tickets to his seminar too. Cool! )
So basically if u think money is the root of all evil, your subconscious whose job ( like the police ) is to protect u by following the rules , will say ‘you should not have too much money’ because u are a nice person and money will make u into a jerk and evil person and tempt you to be unfaithful blah blah blah ( rules made by hearing and watching movies probably )