Today we want to talk about two topics that could be detrimental to a trader. One is trading pride and the other is trading imagination.
First let me tell you a story of a woman who was having some problems. She went to her pastor and said I need help. The pastor asked her what is the problem? She told the pastor that she was dealing with pride. The pastor said tell me about how you are dealing with pride. She said well every time I walk by a mirror I’m blown away by my beauty. I can’t stop looking at myself. I can’t stop looking at my beauty. The pastor said to her what you described is not pride what you described is imagination. Now on a serious note how can pride and imagination effect our trading?
A prideful trader is one that is never wrong in his own eyes. If they get in a position and it goes in the wrong direction they just keep the position. They are like the boat captain that is transporting to much gold and has water coming over the sides. The captain decides the best way to let the water out is to poke holes in the bottom. That makes no sense get rid of the gold dummy. When a position goes in the wrong direction dump the gold or get out of the position. Pride can kill trader. Holding on to long is not the only way pride can kill a trader.
Not admitting your trading methods are wrong can kill a prideful trader.
You might say buy low and sell high but you have nothing to tell you what is high and what is low except your prideful gut. Another way pride can kill a trader is the prideful trader trades too much. This can cause a trader to blowout their account. The prideful trader thinks they know it all and they ride their trades to the trading death.
Imagination can be a good thing. Imagination is a good way to set goals. In the trading world imagination can be deadly. You might be dreaming of how much you will make on a trade. When it goes in the wrong direction you see that new car or boat slipping away. You might be tempted to double up on the trade so you can get the money for the boat back. Only to have it fall more. The imaginative trader will trade to there own demise if they do this. They are imagining things that are not based in reality. When imagination is used for good like developing a systematic trading system hen that is good. If you are sitting around in our trading imagining all the money we will make then we are in trouble.
The systematic trader leaves pride and imagination at the door. They don’t bring either into their trading. They are totally systematic. They base their trading on a system not their gut. Trading is not easy and its not easy to admit your wrong when you are tied to trades. It is best not to get tied to trades. Get tied to a system.