The road to becoming a professional trader is long. It is necessary not only to develop technical skills (that's the minimum to survive the market!) but also moral qualities. In fact, the worst enemy for a trader is not the price, technical analysis, "colleagues," and so on... But rather himself! The tendency, at least during the first months of trading, if not even the first years, is to get carried away by emotions, operate with little clarity, and adopt, obviously without wanting to (and perhaps without realizing it), impulsive behaviors. In this case, it is good to clarify, we are outside the sphere of professionalism.
Now, non-yet-professional traders, whose Achilles' heel is precisely represented by yielding to emotions, generally belong to two categories: indecisive traders and gambling traders. Here is an examination of the two categories, useful for understanding if, unfortunately, you are part of them.
The Indecisive Trader
Are you afraid of belonging to one of these categories? You just have to verify it and try to reverse the course. To help you do all this, here is a "guide" to understanding if you are an indecisive trader.
General Characteristics of the Indecisive Trader
Obviously, indecision dominates this type of trader. It derives from an excessive fear of making mistakes. Now, fear is the feeling that keeps a man alive. This applies both in everyday life and in trading. However, if it is excessive, it poses several risks. First and foremost, that of not earning. In the long run, then, it undermines self-esteem, until it throws the trader into a vicious circle from which it is difficult to escape.
In any case, the indecisive trader delays entering the market, or enters only when he is sure to win, even if, in reality, in the end he earns little or nothing (there is nothing simple and obvious in the market).
Typical Personality of the Indecisive Trader
Generally, the indecisive trader is an anxious person. Indecision, when it is almost pathological or in any case concretely compromises the effectiveness of trading action, has distant roots, which have little to do - at least as far as the original causes are concerned - with the investment activity. The main problem is therefore anxiety.
Now, the same goes for fear: anxiety is a physiological feeling, even beneficial when it is present in the right amount. It is a resource that the body has available to face problems. When it is chronic, however, or detached from reality, then it represents a serious problem, which is good to solve not only from the perspective of trading but also for a question of personal health.
You Belong to This Category If...
- You delay entering the market as much as possible, until any effort is nullified or opportunities fade away
- You repeat the analyses over and over again, until the indicators and study of fundamentals are now redundant, in search of a security that, simply, you will never be able to conquer
- The very idea of trading causes you anxiety, or even fear.
How to Stop Being an Indecisive Trader
If anxiety is truly pathological, then you have no choice but to turn to a specialist: trading advice would be of little use.
If you are simply a little anxious, and this above-average anxiety causes you indecision, try to strengthen your money and risk management skills. These disciplines, in fact, are the only ones capable (from a trading perspective) of giving security to the trader's action.
Also try changing your analysis protocol, if the one in use has demonstrated its fallacy at least a couple of times.
The Gambling Trader
This type has little to do with the previous one, except for one aspect: he too gets carried away by emotions. They are different emotions from those that grip the indecisive trader, let's be clear...
General Characteristics of the Gambling Trader
The gambling trader operates according to dynamics that should not have citizenship in an investment activity, let alone speculative. His work has two peculiar characteristics: it foresees an entry frequency far higher than normal, in the hope of exploiting all the opportunities that the market presents to him; he practices a fallacious analysis work, often hasty, however aimed more at confirming his starting hypotheses than at an objective identification of the signals.
The gambling trader is destined to harm himself. From this point of view, it represents a much less desirable condition than that of the indecisive trader. If the latter simply does not earn, the gambling trader loses, and he often does so in a ruinous way.
Typical Personality of the Gambling Trader
It is difficult to outline the personality of the gambling trader. Also because there are many types of personalities that can fall into the gambling trap. Basically, there could be a certain impulsiveness. After all, it is impossible to gamble without being "at least a little" impulsive. In trading, then, the link between impulsiveness and propensity to gamble is even stronger.
Similarly, it is not uncommon to record a certain inability to face reality, that is, in danger. Behind, just as for the gambling personality type, there could be fear and anxiety, only in this case they are processed in a completely different way.
You Belong to This Category If...
- You have been losing for some time now. Unfortunately, this is the element that most distinguishes the gambling trader.
- You find it very difficult to close a position even if at a loss. In your heart, you always think that the situation will turn in your favor. Sometimes, against all evidence, you are even convinced of it.
- You enter often, even after a bad or hasty analysis.
Obviously, the rate of "gambling traders" is incredibly high among intraday traders.
How to Stop Being a Gambling Trader
Here, too, it is very difficult to completely change the way you act. To tell the truth, it is often the market that produces a change, although it does so only in a traumatic way: after a resounding loss, really dramatic, gambling traders usually open their eyes.
In any case, if you have not yet experienced the extreme loss of capital, and you perceive gambling as a problem (self-awareness is unfortunately a bit rare), unplug for a while and start over from scratch. If the path to gambling has been gradual, it means that you can recover the starting condition more easily.
