Real addictions are a really grave matter and while trading does not involve the consumption of any substances, there are those that believe that trading is really addictive. The incredible emotional rushes that most traders experience both before placing a trade and while in the middle of a gigantic winner or large loser are an acknowledged part of trading, but are traders really becoming hooked on trading? Is there a need for help for traders, or is the situation one where the high proportion of traders that lose cash is just due to them still being in the learning curve and suffering the losses as a standard part of paying your dues? In this piece we're going to analyze the problem and define if there's enough proof to support the theory that trading is indeed addictive. So what is an addiction? There are 2 classes of obsessions, physical dependence and mental dependence. There's a substantial quantity of info on both and definitely beyond the boundaries of this article, but a quick outline follows From Wikipedia, the dictionary definition of obsession includes : Mental obsession, versus physical obsession, is a person's need to employ a drug or enter into a behaviour regardless of the harm caused [emphasis added] - out of yearning for the effects it produces, instead of to relieve withdrawal pains. This is physiologically compounded by the endorphins released into the system that offer a physical feeling effect too. Let's take a look at some of the required practices ( behaviors ) of trading to realize regular gains and some of the behaviors exhibited by many traders and see whether they fit the above. One recognized imperative practice for lucrative trading is good risk control. At the heart if this is ensuring the hazards you take are measured and worked out risks. You wish to keep your losses tiny when they happen and avoid them all together when possible ( like NOT getting into bad trades ). Key tools usually used for controlling likely losses include risk / reward calculations and stop loss orders. Risk / reward calculations are mandatory on each trade so you know whether each trade is a sound business call. Stops are used so that then a good trade is placed but the market doesn't do what you'd anticipated. With the leverage in trading that can work with or against you, risk handling is important. It includes risk handling but the focus is on a bigger scale and a wider scope, for example taking a look at what proportion of your available capital you are placing on any specific trade, without reference to the details of the categorical trade. These practices may appeal to the intellect, but how they feel is where traders get into trouble. There are many typical mistakes frequently manufactured by traders that bring massive losses, missed profits, and ruin for many . These errors run in direct conflict with the known and established good practices for consistent and moneymaking trading, yet are made again and again again by the same traders. Since they're repeated, it'd be reasonable to claim that they became habits.
Let's inspect these habits from the viewpoint of the emotional reply for the individual. Trading without a plan, sometimes called entering a trade without an exit strategy for the trade.
The trader doing this is mostly not following a technical system and is going more on their hunches than sound calculations. This here is an indicator that they're permitting their feelings to dictate their actions much more than their reasoning and motive. If the market moves in their favor, it strengthens the choice to follow their intuition and feeds the ego in being right. Another awfully elemental factor is suspense. If one has the trade planned out and there are no surprises, it takes all the suspense out of it. When you know the end of the tale it takes all the thrill out of it and who wants that? Refusal to use stops. I should just watch it. This is true for initial stops and quite typically for trailing stops after the market has moved in one's favor.
As the move goes their way, they are facing an amazing thrill, plus the endorsement they want about them being a better trader than they really are.
Trading too frequently.
Generally in this circumstance the trader is feeling the necessity to satisfy their perception of lack. They're feeling bad about themselves and instead of do what they know is right, they wish to have the bad feelings go away. One of the more fascinating sides of this actual mistake is that besides the greediness factor, people get a little bit of a thrill going against the guidelines and particularly stepping outside their comfort sectors.
The easy act of rebelling or being adventuresome is what many got a taste of when they first got into trading and how it's so different from what they'd ever done before. The new territory has its appeal and stepping out of the norms and standard rules has a robust gratification linked with it. Naturally the greediness factor is pretty robust here as well. Only hazarding 2-5% of your account and the possibility of a measly couple hundred bucks just doesn't match up with the large numbers one were thinking of with trading, or what's heard frequently in the adverts for the assorted trading systems available. When you are only making $800 on this trade and you see and a that claims I made $9,700 on my first 3 trades!!!, that reasonable profit you made just isn't extraordinarily gratifying. One thing worth indicating at the moment, and it at once relates to our subject is the proven fact that folks will make mistakes.
You'd stop, unless naturally there had been some kind of extra reply that was powerful enough to force you to do it regularly till your foot was totally mangled.
You'd only smash your thumb when hammering a nail once before you modified how you were holding the board unless something was wrong. In comparing the repeated trading mistakes with the established good practices, it is in the emotive reactions of the mistakes being made. Suspense, private pardon and approval, excitement, feeding the ego, being right. The actions concerned in the 2 sets are in direct contrast re both the finance results and how they feel to the trader . Lacking surprise and done with a knowing, good trading offers a lower emotional confirmation of a traders capability on the emotional level. When you are a newbie and you do well, it is way more satisfying, particularly if you hit an enormous one. That sure is a big ego feed. There is an inverse relationship between the discipline required for good trading practices and the feelings concerned in unhealthy trading.
The discipline itself runs 180 degrees against the gratifying feelings and rejects them to the trader . It's the way that they're trading. They're trading in a way that fuels their feelings, and established poor habits both active and emotional habits. If they'd target creating healthy trading habits and practices, follow the established wisdoms and observe themselves in their trading, do the easy things that they should do, their feelings wouldn't flare up so badly and they could start to break the cycle. There are facets of trading that set the scene for the person to become hooked on trading unwisely. So it's not in the activity itself. It is up to the person to be conscious of themselves and their practice to protect against dependence on poor trading. Education, help and correct steerage would be the best advice for traders, and these should be pursued as early as is possible.
The longer the habits are established, the longer it takes to destroy them and re-establish healthy trading practices.
For more information please visit:
Trading With Forex Trading Pipsand
Forex Trading Pips
