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Have you ever noticed that after a solid winning trade you often lose money on the next one? Well, it may be something you can prevent, at least sometimes. You see, after a winner, there is emotion that can cause traders to want to jump back into the market without a signal being present.

False-confidence and even addiction to the euphoria and the ‘high’ you get from winning are things that can end your trading career just as it’s starting to take off. After winners, we may literally invent or see patterns on the charts that are not even there; we convince ourselves into jumping back in the market, subconsciously.

Before we proceed, let me be clear, you cannot avoid all losing trades, sometimes they are just normal statistical occurrences of your trading edge. What we are talking about here are the losers that you can prevent; the ones born of emotion, fueled by brain chemistry that you are probably unaware of and that you need a planned-out course of action to deal with…

Why we tend to lose after winning

Right after a winning trade is indeed the most dangerous time to trade. Whilst that may seem surprising to some of you, it has a scientific basis that we need to understand…

After a winning trade, we feel good, there is no denying that and you cannot stop it, and why would you want to, right? However, this euphoric feeling can lead to disaster of you are not aware of it and how to deal with how it makes you feel. Dopamine is the feel-good chemical released in your brain (learn about dopamine here) when something happens that makes you happy, like a winning trade. The danger comes in the form of addiction. You can become addicted to the feeling you get from dopamine.

For a trader, this means after a winner we are more likely to over-trade and do something stupid with our trading platform because our brains are subconsciously looking to keep the dopamine high going. When riding a dopamine high after a winning trade, our brains naturally perceive less risk in the market and that can cause us to deviate from our trading strategy.

Our brains will do anything to keep feeling that happy feeling from fading. Ironically, as with any other form of addiction, like drugs, gambling, etc., dopamine gets released whether or not what you’re doing is good for you or your body. The very act of entering a trade, an event that previously made you money and made you happy, will release more dopamine in your brain, thus keeping the ‘high’ going. I hope you can see how dangerous this is and how it can cause losing streaks that lead to account blow-outs.

So, the brain will get what it wants, whether you win or lose, and as traders, we need to be aware of this genetic ‘flaw’. Dopamine is truly a double-edged sword that can either reinforce good habits or reinforce bad habits. It is up to you to understand this and make sure you are only reinforcing the good ones. You must understand your own mind and control it so that it does not control you in negative ways.

Solutions

So, now that you know why it’s so easy to lose money shortly after winning, it’s time to figure out how you will avoid this major pitfall in the future. The trick is to have some type of filter in place to catch yourself from making an emotion-fueled / dopamine-fueled trade. Whilst it may sound cliché to once again talk about trading plans, their importance in this matter cannot be over-stated.

The solution to this mistake is to ensure you’re only subjecting yourself to your edge, which needs to be a well-defined trading edge (for example price action trading is my edge). You need to build and follow a trading plan so that you are not simply entering on random whims of confidence or because you think a chart is about to do something. In essence, we just need to understand our brain chemistry and learn that by filtering and following our plan we can hopefully be in a scenario where these releases of feel-good chemicals, like dopamine, are not causing us to become addicted to the feeling of simply being in a trade.

Summary of solutions to battle the tendency to over-trade after winners:

  • You have an actual trading strategy / trading edge that you fully understand and can define.
  • You have a trading plan built around the above strategy.
  • Make sure you only subject yourself to your edge, which should be well-defined and in your plan.
  • Your trading plan should act as a ‘filter’ of sorts – something you always run any trade through so that you can separate those trades that are dopamine-fueled ‘mistakes’ from the ones that are legitimate occurrences of your edge.

Conclusion

The best way to avoid giving back trading profits is by making sure you have no doubt about what you’re looking for as you scan the charts each day. When you reach a point of having mastered your trading strategy, you only need to build a trading plan around it and stick to it, to filter out the emotion-based trades that traders often make.

You can get started learning my trading edge and how I trade the market, as well as how to build a trading plan around that edge, in my price action forex trading course. As they say, a journey of 1,000 miles starts with a single step, and if you want to stop losing money unnecessarily in the market, it’s time to take the first step on the right path.

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About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 15,000+ students since 2008.
Checkout Nial’s Professional Forex Course here.

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29 Comments

  1. Rosario C Songcuan says:

    Thank you Nial. I will make it sure to keep this in my mind everytime I trade, like a Mantra.

  2. Tshepo says:

    GOOD GUIDELINE NIAL,THANKS FOR SHARING THIS INFO…

  3. Atul Kapatkar says:

    After wining trade, confidence level builds and we are searching another opportunities of wining as emotional factor comes into picture. As a result we lose the winning money.
    This is the best article for over-trading.
    Excellent…..

  4. Ruben says:

    “Over trading” is a very complex subject.

    In other words, the frontier between over-trading and “good trading” is very blury

    Specially in the world of manual trading.

  5. GODSPOWER says:

    Good article….. Thanks Nial

  6. Cashflow says:

    I am guilty of this habit.Right Now I even have a trade I am waiting even to break even.Though I was done for today’s trading but didn’t know what pushed me to place a trade tonight.Hope I break even.The mistake has been made.I will try to take caution in future times.

  7. vijay says:

    Thank you very much Nail!
    Very good lesson of a outstanding observation.

    -Vijay

  8. Amazigh says:

    Yeah ..exactly sir…u put accurat definition .to the feelings i had after a winning trades

  9. 100pipstrader says:

    Hi Nial! Everything you said in this post is actually true, and one that always happen to me personally. I have been ignoring my trading plan lately, believing I have masteted it. It looks like it is not the case since I had losing trade where the setup was completely unalligned with my trading plan. Guess this post is a wake up call for me and time to study my trading plan again. Cheers!

  10. Lufuno mavhungu says:

    Big up ,Always learn new things from you, keep the flame up,

  11. Lufuno mavhungu says:

    Big up, I always learn great trading philosophy from u, keep the flame up

  12. Haroun Kola says:

    I also find this in my trading very often. I can’t count the number of times in my trading after a successful trade, I place another trade very soon after. I’m now practicing your tip about stepping away from my screen for 24 hours after every trade, giving myself a break and doing something else.

  13. vijayendra H P says:

    Hi Niel,
    This is my biggest problem.. Solution is still not convincing. We know all the edge but we dont know our emotion level. Very very difficult to over come this problem.
    Any how thanks for bringing.
    Thanks
    Vijayendra

  14. Ivane Zurabishvili says:

    Hi Nial, thank you for very interesting article

  15. Sthembiso says:

    I have seen this many times in my trading and it hurts so much. Thanks for talking about it Nial.

  16. Alessandro says:

    Hi nial
    control my emotions It is my first daily goal. I gave myself the rule not to act on the open market. at the end of the day I analyze the charts and if I find a setup that meets the conditions of my strategy, I plan the opening of trade. thanks to your articles I built a trading routine and I improved my performances.

  17. Thabang says:

    If it wasn’t for your teachings, I would still be in the darkness about Forex and the financial market. Thanks for this article and your priceless course. Thank you my Mentor, Salute.

  18. Dwayne says:

    Very good article Nial I think that has been my biggest struggle and I can personally attest to that a trading plan is essential in trading whether you think you are good or not it is the voice in your head Thad will stop you from making that leap of regrets so to speak

  19. Jags says:

    Nice article, one need to pinch self to realize the current emotion. I wish we had a refresh button to clear emotion and start over.

    Here is my thought, feel free to comment.

    Once we have good trades and made some profit, is it advisable to withdraw your profit from trading account. Like resetting your account balance to even, I believe that gives us a feel to be always caution. Advance trade as if you are starting over.

  20. Amir says:

    That’s why I trade the End Of Day on the daily charts..
    So trades are less frequent and there is plenty of time between trades..if u win or lose.
    I feel about winnings the same as for losers, what is important to me is to keep the margine level high enough to complete the trade, not how much money i made. You do the work and wait for the end of the month for ur paycheck..

  21. Simy Sadoun says:

    Hi Nial,

    Interesting observations and analysis

    Thank you,

    Simy Sadoun

  22. Mario says:

    Thank you Nial ! …
    This lesson reminds me to add to my trading plan to enter half pin or quarter pin in a volatile market …

    Dopamine is also what keeps people and especially teenagers addicted to video games, to Facebook and Twitter … It’s that addictive ! …

  23. Ernest Mashego says:

    Hi Nial,

    Thanks for the insight. I fully agree that euphoria of winning is a problem. I lost 80% of my trading balance account and I am highly devastated about the loss. Everything was going well in the past weeks and I was hoping to reach my trading volume this week with a view to start enjoying my trades savings.

    Regards, Ernest

  24. Tarun says:

    Hi Nial

    Very nice article indeed.

  25. mzwandile says:

    thank u so much,U are a true and wise trader.i suffer from such dopamine and as a result I’m still stuck on an amount less than I started with,that is after I had multiplied it by 12 times…..my heart collapsed everyday when that happened n I had to stop reading for weeks.. …again boss thank u

  26. Lawson says:

    Thank u so much Nial. I’ll keep this in mind.

  27. Ummer says:

    Love you Nial

  28. Mojalefa says:

    Why didn’t you publish this last week :) … because this week I stupidly entered GBPJPY trade and it hit me just when I was happy. The panic emotion activated immediately

  29. Andy Moore says:

    Hi Nial,
    Thanks for this. I would always, always look for a new trade on the euphoria of winning a good one. It always, always ended with me becoming angry with myself for losing it all again. Since taking your course and learning the principles explained I have managed to avoid that now. I always, always look for the right signals at the right time. I have not over traded as I would have done before your course.
    Thanks to the principals covered in your course, my mini account is back up to where it should be. I feel far more confident with your set and forget approach. You make trading so simple it is a huge stress relief.
    Thanks, matey. Really appreciate all you do for us.
    Best wishes
    Andy Moore

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