3 Common Psychological TRADING Mistakes

 Here is the link. 

a large part of successful trading comes

from mastering your mind and your

thoughts let's talk about the three most

common psychological mistakes traders

make and we also have some suggestions

for you if you are struggling with any

of these so let's go ahead and get into

it

psychological trading mistake number one

FOMO trading FOMO is an acronym for fear

of missing out let me paint the picture

for you the FOMO trader is typically

very optimistic about each and every

trade because this trade could be the

one write something about this trade

looks so much better than all the others

so it has to be the one if I miss this

trade there may not be an opportunity

like this one for a while we can all

agree how silly that sounds of course

there's going to be more opportunity

around the corner but although it sounds

silly and obvious the reality is that

this type of thinking affects so many

traders mainly because they don't even

realize it's affecting them and it's a

huge problem because it can cause you to

do two things number one it can cause

you to take every trade you see even if

it's not that good of a trade setup

number two and this one is even worse it

can cause you to increase your position

size on a particular trade because if

this trade does end up being all that

it's cracked up to be why would you only

want to make a few hundred or a few

thousand bucks on it

screw that that's chump change let's

swing for the fence but what happens

when this trade turns out to be nothing

special and despite how much it seems

like there's no way you can lose money

on it it turns into a losing trade and

now you have tons of your capital

invested and are sitting on a huge loss

that will be almost impossible to come

back from you can see how this can be a

huge problem if you've ever struggled

with this let me hit you with some

wisdom from Charlie Munger who is Warren

Buffett's business partner at a recent

Berkshire Hathaway investor conference

Warren Buffett and Charlie Munger we're

talking about how they missed Google and

Amazon because for some reason they had

a blind spot and they didn't see the

opportunity in fact Charlie Munger

specifically said we will keep missing

them but our secret is that we don't

miss them all

so just think about that for a second if

the best and richest investors in the

world aren't worried about catching

every single investment then why should

you be you just have to understand that

missing trades is a part of the game and

it will happen so if this fear of

missing out is something you struggle

with here's our solution for you stay

out of chat rooms and trade alone for a

week or so and if you follow other

traders on social media stay off of that

as well

basically seclude yourself and trade

alone for a bit the reason I say this is

because often in chat rooms or on social

media we see others making money and by

nature this instills a fear of missing

out in the future now keep in mind we

aren't saying chat rooms and social

media are bad by any means we actually

run a chatroom ourselves that is nothing

short of incredible and we highly

encourage you to check it out as it's a

great tool for your trading but even we

realize that some traders might need to

break away and trade alone for a couple

weeks if they are experiencing FOMO now

during this period where you are trading

alone if you feel like you can't find

trades or generate trade ideas without

chat rooms or social media then you

likely need to stop what you're doing

and become more educated on the strategy

that you are trading so you know the

process to sign trades when to enter and

exit them etc because you need to have

an exact plan your trading strategies

should not rely on the trade ideas of

other people trade ideas of others

should be a tool but not a crutch

psychological trading mistake number two

revenge trading these are the types of

traders who can blow up their entire

trading account and lose everything in

just a day or week after taking a

trading loss revenge traders will throw

everything they know about proper

position sizing out the window and will

trade like a madman just to make back

that loss now this may work once or

twice and you'll come out unscathed but

if you keep this up you'll get crushed

bad and it's going to hurt the market

doesn't care about you or your money and

you're going to be the one 100 percent

responsible for it if your revenge

trading causes you to lose everything in

your trading account so please just be

honest with yourself and if this is

something you struggle with at all just

get a grip on it before it really ends

up hurting you and the solution for this

one

is actually fairly simple here's our

advice to anyone who struggles with this

first if you're having this problem

where losses are upsetting you enough to

get you to this point of seeking revenge

on the market you're likely trading way

too big of positions in the first place

so knock that position size down trade

smaller size this should allow you to

not get so upset about losses and you'll

be able to start making decisions based

off of logic rather than emotion with

any trading strategy you're going to

have losing trades every now and then

but the key is making sure your winners

outweigh your losers as Drake once said

you win some you lose some as long as

the outcome is income and if your

position sizing is out of check and your

trading out of anger or revenge then the

outcome will definitely not be income

now if you're still having issues with

this and you know that your position

sizing is in check then maybe it's your

mindset or your expectations of trading

that is the problem you need to make

sure you're committing and focusing on

the long term try to look at the bigger

picture and think about how the long

term success is much more important than

trying to make back that loss right now

this very second revenge trading can

also be a result of expecting yourself

to make money every single day and

anytime you are negative on the day you

will do everything in your power to turn

that around and be up money on the day

well this is just not a realistic

expectation you should have you should

be focused on being positive on the year

quarter month or at the very least week

but being positive every single day is

just not reasonable as markets fluctuate

each day and you can't control that

psychological trading mistake number

three gamblers fallacy now this might

not necessarily be a psychological

mistake but rather just a very common

misunderstanding of some basic

probabilities and then it will cause you

to make very poor trading decisions and

in some cases this one can also compound

and cause very big losses now this

actually spans far past just the trading

world and as you can probably guess by

the name it's most commonly associated

with gamblers we certainly don't want to

treat our trading as gambling so let me

show you how to avoid this common

mistake that so many traders make

a quick Google search will show you the

definition of gamblers fallacy but let

me put this in layman's terms that

anyone can understand we all know that a

coin flip is a 50-50 bet so if you flip

a coin 10 times the expected outcome

would be five heads and five tails but

although it's expected that the same

number of heads and tails will show up

we know that the actual number can

deviate in either direction but let me

ask you a question

let's say we plan on flipping a coin 10

times and the first five coin flips all

land on heads what is the sixth coin

flip more likely to land on heads or

tails

if you said tails then you my friend

have fallen victim to gamblers fallacy

let me explain the expected outcome of

ten coin flips is of course five heads

and five tails we just covered that but

rolling five heads in a row does not

change the probability of the next coin

flip the probability of the next coin

flip is completely independent from the

past results so what is the sixth coin

flip likely to land on after five heads

in a row the answer is that one is not

more likely than the other it's still a

50-50 bet gamblers fallacy refers to the

thinking that a series of events will

somehow affect the outcome of the next

event as if there was some sort of

balancing force at work and in this

example the coin somehow knew that it

just landed on five heads in a row so

now it should land on tails and this

gamblers fallacy actually applies to

many other parts of life as well a few

examples are someone who flies a lot

thinking they are somehow working their

way towards a crash even though each fly

is independent of the last people at the

casino who see that the roulette wheel

just landed on red ten times in a row so

now they start putting their money on

black even though the previous spins

have no bearing on what the next spin

will be and finally it also applies to

trading and so many traders fall into

the clutches of this fallacy if you have

five losing trades in a row this does

not mean that the next trade will be a

winning trade just because you feel like

the losing streak has two insane

many traders tend to increase their

position size after a losing streak

because they feel their luck has to turn

around soon but the reality is you're

just increasing your risk on a trade

that has the same probability of success

of all the ones you just lost money on

the market does not know or care if your

last few trades were losers or winners

now the solution to this one is easy

it's just as simple as understanding it

as you do now and then exercising

awareness now that you understand what

gamblers fallacy is you should be aware

of it and just make sure you aren't

affected by this type of thinking try

and treat each trade independently from

any past trade you've made if you have a

streak of losers that does not mean the

next trade will be a winner and on the

flip side if you have a streak of

winners that doesn't mean the next trade

is more likely to be a loser

trading is a numbers game and you have

to eliminate these psychological

mistakes and focus on trading the

numbers once you can do that you'll take

your trading to the next level the stock

market is not a place for weak emotional

people make sure your own worst enemy

doesn't live between your ears so

alright guys if you enjoyed the video

make sure to click the like and

subscribe button below and also be sure

to check out our free free video series

these videos will help your trading

tremendously and they are completely

free all you have to do is go to our

website and input your email and we will

send you the three free videos so I will

see you there