Psychology of Trading
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Addiction to trading. A log on the road to success
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Addiction to trading. A log on the road to success

created Paweł MosionekJanuary 29 2019

Do you love this excitement while trading? Are you excited about each and every transaction? At the weekend you can not wait for the market to start again? There is a chance that you are addicted. Try to understand the risks involved and master them as soon as possible.

What is addiction

According to the classic definition, addiction is acquired with a strong need to perform a given activityor taking the substance. It is defined as an uncontrollable behavior, assessed as highly risky in possible consequences.

Translating this into trading, the act is exactly the internal need for transactions, and the risky consequence of capital loss. Dependence on investing and investing itself is mainly due to the fact that there are strong emotions.

We should not feel excitement, uncertainty or hope when rationally analyzing and making deliberate transactions. Our mind remains concentrated and under full control. Conclusion of the transaction is just the culmination of the previously performed work.

In a situation where we are not properly prepared, we analyze the market in a hurry, we do not consider alternative scenarios, we stimulate our mind ourselves, but it will gain some uncertainty. This uncertainty arouses fear of loss, but at the same time hoping that it may succeed. Both of these emotions are extremely strong and pose a threat to your capital.

Effects of trading addiction -> Gambling

forex gambleWith engulfing visions, we become victims of our transactions. Admit it - how many times have you launched the platform and in just a few minutes decided to open a position right away?

Thoughts in style "Now is the opportunity", "I'm escaping the market", "If I have a moment, I will play". At the same time, there is an analysis done on the knee, no escape plan, no alternative scenarios - it does not matter to us. We want to trade. This is a huge mistake, and the sooner you understand and then master it, the better your chances of success.

Of course, you can immediately start with the darkest scenario, i.e. total bankruptcy and drowning in debt, which is easily compared to overdose. But this is only a consequence of the addiction that deepens over time and the extreme last resort. Along the way, we will notice phenomena much faster, which are observed much more often, that is, resetting our account with the capital earmarked for investments. Sometimes more than once.

Occurrence of emotions during the trade can lead to getting accustomed to such a condition should always occur. Deepening this state means that we stop investing or even speculating and we start to pursue pure gambling.

The signs are such activities as:

  • an attempt to break away at all costs,
  • doubling rates with each successive lossy position,
  • matching the transaction volume "by eye",
  • keeping unplanned losses, cutting profits,
  • shortening the analysis to the absolute minimum,
  • breaking all other logical, previously established principles of our strategy.

Loss of control over risk, and above all emotions, is a nail to the trader's coffin.

"Click on the demo" won't help

You can meet with suggestions addressed to people with the problem of trade addiction, to reduce to a minimum the operation on the real account and moved to a demo. It's just that it's not in order to master the strategy, but "Hiccups", that is, making unnecessary, ill-considered transactions, just to relieve the need for addiction. I think this is one of the worst solutions.

Trading on demos does not provide us with such emotions as on real money. And yet emotions are what pushes us into this addiction. Such therapy will certainly prove ineffective, and very likely even worsen the case. When unloading our internal needs, there is a risk that we will fall (or rather we will only seem to) a new, ingenious trading system, a relationship we have not seen before. In other words, we will experience an apparent illumination that we will want to test as soon as possible in real capital.

If you do not know what to do, do not do anything

It is true as old as the world. If you feel an inner need to open up a new position, fight it as soon as possible. If you can't, turn off the platform. Lack of a clear plan, alternative scenarios, unsupported strategies, analyzes, understanding of market behavior, or neglecting control over risk will certainly contribute to your failure. But that's only part of the solution. First and foremost, control your mind and emotions. Be passionate about trading, but don't get addicted to it. Control your account - only you can influence it.

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the ForexClub.pl website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.