Each day, you make so many decisions about your life. When you wake up in the morning, what clothes to wear, drive your kids to school, which route to take, what to eat for breakfast, and whether to stop off to fill the gas tank. Each decision that you make requires little thought, and are ones that you make over and over again in your life easily.
Do you obsess over such decisions?
I doubt so. Why should you? These decisions have very little to almost no impact on your life. On the other hand, to someone with obsessive-compulsive disorder you’ll get a very different reply. Every little thing is a big deal to someone with obsessive-compulsive disorder. So what does this have to do with trading?
The Obsessive-Compulsive Trader
A novice trader just beginning the journey of trading may behave as though they were obsessive-compulsive. Obsessing over every detail, second-guessing their trades, abandoning their trading plan in the middle of a trade, it can seem as though they are neurotic. Even deciding on setting a stop 1 or 2 pips different can be the cause of huge stress and important. Every single little detail is a big deal decision!
To a seasoned trader, such a trader may really seem to be suffering from obsessive-compulsive disorder!
For a seasoned trader, making decisions are a matter of fact. They have made decisions so many times that it becomes an every day thing for them, and it can seem as if they make trading decisions with little or no thought. It is as though it makes no difference whether the trade turns out to be a winner or loser. And so often, with seasoned traders, you can’t tell if they had a good or bad day.
Wouldn’t you like to trade in such a free and easy manner?
It makes trading and pulling profits out of the market seem almost effortless, almost as if it were no big deal.
Taking Your Trading Too Seriously
Traders often take their trading decisions too seriously and it’s easy to understand why this happens. There are a couple of reasons this happens.
When it’s your money on the line, protecting and making it grow is your main objective. Each time you make a decision to trade, you are putting your money at the risk of loss. It’s easy to obsess over every single little detail, because it affects something so close and important to you!
Another reason is traders putting their ego on the line. When they stake their reputation and credibility on being a “master trader”, they feel they have to be “right” about the markets. When they lose, it’s a slap in the face they were “wrong”. It can make them conscious of what other traders might think of them. The more they dwell on it, the more significance each detail takes on. Until each trading decision can become such a big deal as if their entire social life depended on making winning trades.
Some traders even begin to have a personal relationship with the market, where every little thing that happens becomes personal. Every detail takes on personal significance and meaning to the point where a single error can make their whole day lousy. It’s almost like having a quarrel with their lover.
When the trader imbues too much personal significance to trading, each loss can be emotionally devastating and possibly even cripple the trader’s ability to trade with clarity and confidence. In a sentence, making every single detail a big deal thing is bad!
The more attached a trader gets to every single trade, the more emotional and reactive they can become. Their thought processes get clouded by emotion, and instead of clarity, vision to see the markets become distorted and blurry.
It’s much better to take a detached, matter of fact approach towards trading the market. But how do you do it?
Making Trading Decisions From a Detached, Objective Point of View
When you understand that you are going to take many trades and not just a few significant ones, you’ll start seeing your trades differently. The result of a single trade isn’t as significant anymore, because it’s only one of the many trades you are going to take. This reduces the importance of a single trade in view of the bigger picture. Together with a solid, tested trading strategy, you have the confidence that you will come out ahead after a series of trades.
A single losing trade, or even a string of losing trades, doesn’t bother you that much anymore. It’s “par for the course”, as they say. Losing trades are a matter of fact, the “cost” of doing business in the markets.
It also helps you as a trader when you thoroughly understand and prepare for the risks of trading. Using proper risk management, you risk only a small percentage of your trading capital on each single trade. And when you know this, it gives you confidence that a single losing trade won’t make or break your ability to continue trading. Even if you should go through a series of losses, you should still be able to continue trading since the bulk of your capital is still intact.
With proper preparation and risk management, the personal significance of each trade is reduced. In turn, this helps you to keep a clearer head, view the markets more objectively and trade more easily. After all, why should you worry? Each trade has little consequence on your trading capital. You might as well take trading free and easy, and have fun doing it at the same time!
And when you understand this, you can start to enjoy trading for trading itself. 