The psychology of trading is the hardest aspect to deal with.
See, for the past 3 months, I did not trade much because I did not feel confident enough to enter.
Looking back, this was mostly because my positiions were too big for my account. That thought of a bigger loss in case the trade goes south, scared me.
My solution to overcome this fear is to trade smaller (just 50-100 shares per trade) for at least the whole of February. This way, I can focus all of my attention on finding ideal setups and executing each trade according to my plan.
Then came yesterday...
Yesterday, I found $DPW. I know this ticker and I know that it can spike.
It had a great intraday HOD breakout setup around $1.40, with a strong support level around $1.35. With a very conservative plan to enter it for a break to $1.50, this would have given me at least 2:1 reward/risk.
The chart had room to reach at least $1.60 (which it did), potentially even $1.80.
So, with such a great setup, my plan to just focus on improving my trading performance (especially my winning %) went out of the window.
I entered a vicious circle:
Greed kicks in -
greed leads to recklessness -
recklessness leads to considering bigger positions -
considering bigger positions leads to imagining a big loss in case the trade goes wrong -
imagining that big loss leads to thinking about just going in smaller -
which leads to greed kicking back in, suggesting bigger postitions -
this all leads to hestiation to enter the trade -
and that hesitation leads to missing the optimal entry -
which ultimately leads to missing the trade because I don't want to chase.
Yap, in the end, I did not take that trade. Instead, I watched it from the sidelines, doing exactly what I thought it would do.
And this, really (at least for me) feels worse than taking a loss. That feelling of actually being right, but tricked out of the trade by my own mind.
It's tough to break behavioral patterns. But that's something I have to overcome soon.
I really need to stick to my original plan and not to change the plan seconds before I want to enter a trade.
Yeah you described part of my mental battle before getting myself to hit the buy button. Fear of being wrong and failure is what gets me. Like you said keep your position size small. Personally I'm more mad at myself for psyching myself out of a trade vs making a plan, entering the trade and sticking to it regardless of the outcome.
@alexg0930 This is the way to go. The thing is that I know this. That's why I made the plan to reduce my size in the first place. And yet, I let the potential of bigger profits spoil that plan by thinking about bigger size. Great to see that others are making great progress with this strategy! Thanks!
@Kody Exactly! That's how I feel, too! So, small size it is. Sounds so simple.
@alexg0930 I totally agree! BTW, I like your video about using 60min charts. This also helps to take some of the emotion out of the trade (I guess).
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