Most of the traders look after the perfect strategy. However they are unknown to the fact that no strategy is 100% reliable in the markets. Meanwhile they learn to read the charts, patterns, candlesticks patterns etc. In the end they eventually look for the profitable strategy. However without having the proper data about the strategy they rush to trade on the strategy. As a result they need to face major losses in the starting of their trading career.
However they abandon the strategy without knowing the aptitude of the strategy. Understanding about the why traders expect quick results may help trader develop the patience and discipline.
The Desire for Immediate Results
The urge of the immediate results often driven by the need of quick profits and fear of missing out. These terms often influenced by the emotions. As this moves forward it turns in the overtrading, revenge trading, forced trading etc. However profitable trading relies on patience, discipline and strong trading psychology. Traders believe that the moment the find the strategy, the profits will follow. When the market give them reality check, they often find themselves frustrated, stressed out etc. Rather than accepting the loss they jump to the another strategy.
The Cost of Impatience
When trader feels strong urge to make money, they often trade abandon their decision making. They run after the markets and profits.
Excessive Trading: Trading until the trade end in the profits or taking too much trade.
Avoidance Loss Limit: Letting the trade run without the stop loss, hoping that losing trade will quickly turn into the profitable one.
Emotional Enervation: Instant rush of the dopamine while placing the trade and cools down after the win or loose cause the emotional burnout.
Every Strategy Experiences Losing Trades
Losses are the fixed reality of the trading. No strategy can avoid the losses in the markets. Everything works in the probability in the trading. Every strategy and every traders even professional traders experience losses. However they still stick to that strategy because they know over the long period of time. Because they that this strategy will brings the profits again. It’s just that probability didn’t play in my favor today. In trading those who think of the survival in the long run of the trading. Eventually they end up being the profitable trader.
Why Losing Trades are Inevitable
The Nature Of Probability: Even the high accuracy strategy model works on the probability. The markets conditions aren’t controllable. Therefore every strategy will face losing streaks.
Changing Conditions: In the different market conditions the strategy performs differently. Like some strategies performs well 1st quarter, some of them performs well 2nd or 3rd quarter. And some strategies performs well in 4th quarter. The profits and losses may increase or decrease depending on the quarter and the strategies.
Bad Trades vs. Bad Outcomes: A perfectly process driven trade still may end in the losing side. Experienced traders accept it as the part of the process.
The Impact of Unrealistic Expectations
Unrealistic expectation often encourages new traders to chase the profits. As a result traders ends up trading at the random levels which leads to face unnecessary losses. In the hope making the wealth under the one night often creates unnecessary pressure. Which leads to avoid the disciplined process. Automatically this turns into the fomo trading, revenge trading etc.
Mental Pressure and Execution Errors
When a trader tries to make money from every trade. Then the trader eliminate the terms”losses are the part of the process”. Instead they start taking every loss as a personal failure.
Increases Fear & Hesitation: This emotional pressure forces the trader to trade on every setup, rather than knowing it is a valid setup or not.
Promotes Loss Recover Trading: After a one loss, trader instantly jump to another trade. In the view of recovering the loss again. As a result this increases the loss overall.
Develops Impatience: Traders may exit early from the winning trades, thinking that profit may get disappeared soon. On the other hand holding the losing trade hoping that the trade will reverse from somewhere.
Why Traders Abandon Strategies Too Early
Traders often abandon their present strategy because the existing strategy brings consecutive losses. Meanwhile this is the normal behaviour of every strategy in the market. However the traders doesn’t try to understand probability theory of the markets. When a strategy fails to deliver the desired results, traders frequently doubt themselves and start the forcing the trades. Meanwhile they don’t give enough space to the mind to accept the loss.
Unbearable Losing Streaks
Every strategy, even the strategies that professional traders uses, experiences losing streaks. Even the 60% win rate may let you face 4 losses out of 10 trades. It doesn’t mean that the strategy is useless or something else. Just take this way that it’s a market behaviour.
The Emotional Bias
Cognitive biases often causes the trader to abandon their core trading rules set. However the disposition effect is booking the winning trade too soon to lock the profits as soon as possible. Vice versa holding on the losing trade hoping the market will reverse. When the rules required discipline but these fear surpasses the discipline.
Lack of Backtesting & Conviction
Ways To Develop Realistic Expectations
Set The Realistic Returns
Pause the thinking of doubling the trading account in the one night. It eventually creates the pressure which compel you to do impulsive trading.
Final Context
Most trader expect immediate results. When the strategy fails to deliver that they often abandon the strategy.
Every profesional trader understands that every strategy faces losing streaks in the long period of time.
Instead of abandoning the strategy, they focus repetition the process, strategy and execution.
In trading, patience isn’t word only but it’s the foundation of the trading success.