Jumping the Gun… The Fear of Being Left Out : a Post on Manual Trading Psychology

This past week was very interesting for me in several different ways. Trading my support and resistance manual trading system on such small time frames (one hour, 20 pip renko) has reminded me about several important aspects of manual trading psychology. I certainly know that I have never been exceptional at swing/day trading since I am not used to the constant evaluation of the market and the stress of having to open/close positions almost on a daily basis. However I thought it would be a good opportunity to practice given the interest on my S&R system and my personal interest on the study of my own trading psychology. Of course, those of you who have followed these tests since the beginning now that the original idea was to test the system on the daily/weekly S&R levels as I do with managed live accounts, however the fact that the demo account does not allow me to trade under 0.1 lots catalyzed my decision to trade on a day trader fashion since a lower lot size would be needed for the movements necessary to trade the S&R weekly levels with adequate risk. Certainly I also want to show you how I trade weekly S&R in the long term so I will open a second demo account with a much bigger balance to also show you how this trading is done.

Now, going back to day trading S&R levels, I found this week that not only is it hard for me to make decisions on such low time frames but it is also hard for me to control my psychology because of another fact. I am being watched ! Certainly having the pressure to put up some decent performance is not good for any trader and I do feel somehow obliged to bring positive results to my dear readers. I also know that having this pressure obscures my thinking and this may have the counter effect of making me lose more trades because of emotional decisions made regarding trades. For this reason this is a golden opportunity to further analyze my psyche and write some further insights into the psychology of manual trading.

Today I wanted to write a post about one of the things I noticed about myself this week when manually trading the S&R methodology on the 1 hour and renko 20 pip time frames which reminded me of when I started trading in high school (yes, it has been a while !).

I am what I would call “a gun jumper”, I love, absolutely love, to “jump the gun”. What does this mean ? This means that I am absolutely horrified by the thought of being left out of a move, specially when I know that the move is necessary to get a profitable result to impress someone (in this case my dear website visitors :o) ). This makes me enter trades too frequently, sometimes against my own fundamental analysis. Of course, I notice now that I realize more when this is happening and I do put a tighter risk criteria on the “emotional” trades, however it happens and it happened this week.

You will notice when you access my trading journal (ftp://fxreviews.exavault.com, username journal, password trading), that there is a trade taken last week labeled as “impulse”. This trade was taken by me against the prevalent GBP/USD trend in an effort to accumulate more profit on a possible counter trend move. I however was conscious about the precarious analysis behind my decision and placed a tight SL and moved my stop to break even as soon as it was 10 pips away. The trade was luckily closed with a small profit and reminded me about my defects as a trader.

It had been a long while since I had taken such a bad impulse trade. Against my fundamental analysis and barely in alignment with any technical perspective. Why did I do this ? The first reason would be baby sitting my trades. I have found out that being a full time trader (as I am now) somehow manages to glue me to the screen for long periods of time, even if I do not have to be there. While I watch the market, interpret the news and manage my trades, my psychology starts to play against me. There are a thousand hypothesis going on inside my mind and my first crystal clear analysis starts to blur away in the mist of market movements.

What is the remedy to this problem ? For me it seems to be retrospective. At the time these things happen I certainly cannot control them. However when I analyze the trade I do realize the err of my ways and I do make a decision to restrain myself when I feel the same way in the future. That is exactly the reason why you have to document and analyze all the trades you take. Doing this allows you to analyze the reasons and emotions that made you take a given decision and take action so that the situation does not arise again. I also use positive reinforcement, for each time I go through with a trade as I planned at the beginning and for every time I don’t take an emotion based trade I thought about taking I eat something I like, I absolutely love chocolate, so that seems like a good treat for me.

Trading manually is definitely a complex and unique journey that each one of us lives in a different way. My piece of advice is pretty simple, profitability comes from learning and learning comes from analysis so documentation of your actions should be an absolute must in your journey towards manual profitability. I am learning a lot from this experience as day trading S&R is a little bit different than my usual long term S&R trading which usually involves stops in the order of 100-300 pips, not the 10-30 pips I’ve been trading lately !

If you want to know more about profitable trading, particularly profitable trading using automated trading systems please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

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