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sabotageForex Traders have a tendency to sabotage their own efforts in the market, and most of them don’t even know they are doing it. The inherent paradox of trading is that the harder you try to make money or avoid losses, the more these things tend to elude you. This is something that you probably have noticed or felt via your own frustration in making money in the markets.

Do you ever enter another trade immediately after a winner closes out, and then later realize you sort of just jumped into the market without your edge or strategy being present?

Do you ever consciously risk more than you know you should on a trade, and then regret it as the trade immediately goes against you?

Do you ever stop trading for a while after hitting a few losing trades just because you think if you ‘wait it out’ your bad streak will end?

As humans, our biology tends to interfere with our trading much more than we think. It has been proven that people become less risk averse after a winning trade or a series of winning trades, and more risk averse after a losing trade or series of losing trades, even if they are following an effective trading strategy to the T.  This is a BIG mistake; there is no logical reason to become less risk averse after a winning trade or more risk averse after a losing trade, because your previous trade does not determine the outcome of your next trade. Traders tend to ratchet up their risk amount after winning trades because they feel euphoric and over-confident and it’s these emotions that will soon lead them to give back all of their recent gains, and probably more.

Stop giving back all your winnings

I’m sure you’ve experienced a nice winning streak in the market, and you were getting excited that your account was growing. Then, probably faster than you made that money, it was gone, and maybe even more. You were left feeling confused, angry, and frustrated. Then the self-doubt sneaks in, the self-criticism, and you might feel like you are just not cut out to be a trader. Does this sound familiar??

I can assure you this is actually ‘normal’, most traders go through a similar situation at some point in their careers. The reason it’s ‘normal’ to give back your winnings to the market, is because we are actually biologically wired to do so.

• It’s a fact of human biology that we become less risk averse after a series of winning trades.*

• It’s a fact of human biology that we become more risk averse after a series of losing trades.*

• In reality, you aren’t any more likely to win after a winning trade or lose after a losing trade, assuming you are strictly following your trading edge / trading plan.

• If you are strictly following your trading edge and trading like a sniper, you are only going to decrease your profit factor by reducing risk after a losing trade, and you are only going to open yourself up to larger losses if you increase risk after a winner. Because you are NOT more likely to hit another winning trade just because your previous trade was a winner, nor are you more likely to hit a losing trade just because your previous trade was a loser. This is due to the random distribution of winners and losers that exists for any given trading method.

So, the reason you’ve given back a lot or all of your winnings in the market, is that it’s natural for us to feel more euphoric and over-confident after we make some money in the markets. We then tend to forget a little more about the risk on any given trade and focus more on trying to turn our recent winnings into even more; essentially this is greed getting the best of you. Similarly, when we hit a string of losers we tend to cut down our risk more than we should, or we become afraid to enter valid trade setups all together. This is also emotion getting the best of you; it has nothing to do with logic or reality, because in reality you are not more likely to lose on your next trade just because your last one was a loser.

I can’t even tell you how many emails I get from traders saying something like they “built their trading account up a decent amount and now are below their initial starting value”; almost every trader goes through this at some point. You have to decide if you are going to recognize that you are doing something wrong and try to fix it, or stop trading all together. We are all inherently flawed as traders, just because we are human, but we have the gift of a very powerful and highly-evolved brain that can overcome these flaws if we make a conscious effort to do so.

Stop second-guessing your trades

worryTop traders are always confident in any trade they take, because they know what their edge is, and they don’t trade unless it’s present.

Thus, top traders don’t second guess their trades, whether a trade results in a winner or loser, they fully accept the outcome before it happens and they don’t enter unless they’re confident that it’s a valid instance of their edge.

You never know ‘for sure’ what is going to happen even though at times it can seem like you do. This fact alone accounts for most problems that traders face. It has been said that money management and trading psychology are the most important aspects of successful trading. This is true, but it’s also true that one’s trading method heavily influences their trading psychology, so you need to be sure you aren’t also sabotaging yourself by using confusing and overly-complicated trading systems. These trading methods can certainly cause you to second guess yourself, since you aren’t really sure how to enter or you have to line up 10 different indicators to find an entry signal.

Having a clear and clean trading strategy like price action will go a long to help you remain clear-headed and objective, and this will help to prevent you from committing the trading mistakes we discussed previously. We have to do everything within our power to avoid sabotaging our own trading efforts by giving into the emotion-laced temptations that we face in the markets.  Trading with an uncomplicated yet highly effective trading strategy like price action will help us to put the odds in our favor.

Overcome trading self-sabotage with patience and logic

I wish there was a ‘magic-bullet’ that would fix all the inherent flaws in our wiring that cause us to make decisions that sabotage our own trading, but there is not. The only way to succeed in the markets is to circumnavigate the primitive parts of our brains that tend to dominant our trading decisions by using our more advanced and more highly evolved brain areas. We must use logic, objectivity, and delayed gratification if we want to succeed in the markets.

The reason we tend to do things like risking more than we normally do after a few winning trades or dial-down our risk too much after a few losers, is mainly because it ‘feels’ good. Most traders trade based far more on how they feel (emotion) than they do on logic and rationality. This is the reason why most traders lose money. The only way to avoid this self-sabotage in our trading is to have a thorough forex trading plan and follow our plan and trading strategy with discipline and patience.

In order for you to stop sabotaging yourself in the markets, you must learn to be patient. One thing that I can personally share with you is that if you DO learn to trade patiently and ONLY enter the market when your trading edge is present, you will be unlikely to have large strings of losing trades. Trading like a sniper will naturally eliminate the potential to lose a lot of trades in a row, which will in-turn eliminate a lot of the potential for you to become too risk averse as most traders do when they lose a lot of trades in a row. Traders who lose a lot of consecutive trades typically do so because they are not following their trading plan and they are jumping in and out of the market without waiting for their edge to appear. That’s not to say that you can’t have large strings of losers as long as you are following your trading edge with discipline, because you can, but it’s far less likely to occur than if you aren’t following your plan and are trading off emotion.

chessYou see, trading is a profession that you succeed at by putting the odds in your favor, in all aspects of your trading. Once you fall off the wagon and start ‘running and gunning’ rather than trading like a sniper, you immediately turn the odds against you…even if trading in this manner feels good. Good trading is not necessarily exciting or filled with emotional highs and lows…if you are calculating and calm in your trading, you will not be surprised by much, you won’t have huge unexpected losers or winners, but all of your trades will end within the realm of what you expected, winner or loser. Traders become emotional when their trades don’t end how they expected…huge account-destroying losers or account doubling winners…both of these things are the end result of emotional trading and self-sabotage of one’s trading account.

Here are some quick-tips that you can use to help you stop sabotaging your own trading efforts:

• Admit and accept that you’ve been trading emotionally, and decide to do something about it.

• Understand that your previous trade has zero affect on your next trade; do not trade based off the emotion you feel from your previous trade. Separate yourself form the market after your previous trade for 24hrs or however long you need to ‘cool down’

• Stop entering trades just because your previous trade was a winner and you feel confident. Also, stop risking more than you are comfortable with just because you won on a few trades.

• Stop avoiding trades only because you’ve hit a few losers recently, and don’t drastically dial-down your normal risk amount just because you think your losing streak is going to continue.

• Understand that if you are following a high-probability trading edge like price action, and sticking to it, you have to trust your edge. Don’t sabotage it by cranking up your risk after a winner, or avoid valid setups after a loser. Have a trading plan based off your edge and stick to it.

• Record all your trades in a forex trading journal. Doing this will give you something to stay accountable to and will reflect back to you your efforts to remain disciplined or the lack thereof. It will show you in definitive terms how damaging the self-sabotage mistakes that we’ve discussed today can be.

Conclusion:

Sabotaging your own Forex trading efforts is perhaps the most frustrating part of trading, and most traders are guilty of it at some point in their career. If you find that ‘second-guessing’ your trading decisions is one of the main ways you sabotage your own trading efforts, then it’s most likely because you lack confidence in your trading strategy and don’t believe in yourself. I personally trade using price action strategies because of the simplicity involved when making each trading decision. Over the years, I have become extremely confident in pulling the trigger on trades I believe are good opportunities. I attribute this confidence to adopting a ‘simplified’ trading strategy and by repeating the same trading routine day in day out for over a decade.  Most successful traders I know keep things simple, they follow a trading routine religiously and always have a plan of action.  If you can follow these important points, I believe your trading results will improve dramatically.

If your interested in learning more about  ‘simplifying’ your trading strategy and increasing your confidence, check out my price action trading course & traders community here. Good Trading, Nial.

*Works Cited:

http://finance.yahoo.com/blogs/daily-ticker/billion-dollar-trading-losses-biology-blame-180645170.html

nialfuller

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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42 Comments

  1. KOBBY says:

    hi sir,tanx for the insight u’ve giving me. u’ve talked exactly about my problems.i need great discipline, patience, focus. you are a great teacher.
    God bless u sir

  2. mehmet says:

    HI SIR,

    YOU ARE THE MOST TALENTED TEACHER I HAVE EVER SEEN. THANKS ALOT FOR YOUR CONTINUED SUPPORT. LOOK FORWARD TO SEE UPDATED VIDEOS SOON TAKE CARE…

  3. Tomson says:

    Hi Nial,

    One thing I have noticed about myself when trying to change my trading style from lower time frames to the Daily.

    It is that I take the position at NY close-time and it is good setups, this is fine.

    But sometimes when I look in to them the day after or two in the middle of London/NY-session and can see that the position is going against me so I decide to close it down and sometimes even open a new position in the opposite direction. Just to see that the pair then continue going in the first direction.

    I guess it is my lack of patience when I’m in the position, or just afraid of loosing the few pips I have earned.

    It has happend several times now, so I have decided (as you say also) ONLY looking at the charts at NY close, use “Set and Foregt”, and this really helps me a lot.
    Even if it was a bit hard to not look at the charts until NY-close the first days, but it gets more easy now.

    Thanks
    Tomson

  4. Edison says:

    Dear Nial,

    Your article enlighten me about what and how is real Forex trader. I just want begin resume my demo forex after stop for years. I will always reread your article for step into Forex Trader path. Thanks lot.

  5. Frank says:

    Hi Nial,10ks 4 dedicating so much 2 writing these articles and sharing them with us. I have traded losses since i started trading just because of my ignorance of what trading is all about. In my country, people believe that forex trading is dubious and that no 1 can make real money from it. Your articles have been an eye opener 2 d reality of fxtrading. I’ll surely get my own copy of your price action course as soon as i’m ready. 10ks alot. Keep up d good.

  6. kumar says:

    hai nail this is the best

  7. Thambirajah says:

    Another wonderful article Nial. Well said. Keep up the good work.

    Best wishes

  8. Sonja says:

    Thank you Nial, great work, the more I read your articles and reread your course material, my trading improves with every trade I take. I´m starting to believe in my trading plan, myself and in my decisions when I enter a trade!
    The points in your articles are usefull for every aspect in life, not only for trading and that is really a great help!!

  9. radiostar says:

    Undoubtedly one of the most important lessons on here. Thank you for posting this page. It is highly relevant and you have posted it at just the right time for me. I needed to read this.

  10. olori says:

    g8t write up

  11. kotijett says:

    thanks Nial… awesome!

  12. SWISS CHF says:

    the inherent flaws in our wiring that cause us to make decisions that sabotage our own trading.

    I thought I was alone, it just happens to me only.

  13. Tony says:

    This article perfectly describes me! I already perches the course and now trying to break my weakness. Hope that one day I will. Thanks so much Nial

  14. nabs says:

    Great article

  15. walker says:

    Bingo !!! Nial

  16. Carolynn U. says:

    Nial, This article was just what I needed ! I’ve been making winning trades and then giving everything back. No more ! Thank you so much for your insights and encouragement.

    Gratefully, Carolynn

  17. Ramli M.S says:

    Thamks

    Great advice

    Cheers

  18. Ross Daw says:

    I’ am a great trader, when I’ am not emotional and euphoric. I’ am a rational trader, when I’ am not emotional.
    I’ am an emotional trader when I succumb to stress.
    Great article Nial, put’s thing’s in perspective. Cheers…

  19. James mboho says:

    Oh Nail, how I wish I have read this article today before trading, I would’nt have mess up my trading plan. I begin to wonder, where you there when I was Emotionally devastated and down after my lossing trades?. Pls Nail, will you do me a favour?. This emotion thing ………. Well I don’t know… Anyway this is one of the great articles. Well done. Thanks. I will apply those useful suggestions whenever I’m trading

  20. felipe says:

    these concepts are very simple yet very effective, for a beginner like me it’s worth a fortune!

  21. Tomson says:

    Thanks Nial,

    So true, trying to repair one after another of the mistakes that can be done here. (not so many left now I hope)

    Thanks
    Tomson

  22. slivester says:

    Thanks Nial God Bless You

  23. Preciouschizy says:

    Great article Nial. Thanks a lot!

  24. ed says:

    very good, thx!

  25. Pham says:

    Very useful article for me, Nial, thanks for keeping us informed. I try to be professional!

  26. Dale Kevin says:

    Almost every trader aspiring to be the best stumble into an experience that you have illustrated. This article is another eye opener. Thanks a lot! I’m taking notes about some important experience-based advices you wrote.

  27. Christopher Lee says:

    Thank You Nial.Very well stated!

  28. David says:

    Nial,

    Thanks for sharing the lesson today. I guess we all have the same learning curve and have to go through the hell before we can get to heaven with our Forex trading. I like what Ovosi said above, I also know my plan and edge inside and out now, but sometimes I lose it when looking at the charts and end up making silly mistakes. Only to say, why did I do that. I am tracking all of my mistakes in my journal hoping to never make the same mistake twice.

  29. steve says:

    This is great.

    Keep it up.

    My regards to all.

  30. Andrew says:

    Thank you Nial for the great article. Consistence really is important in trading. I am grateful. The fact of reducing your volume size after trading is very true and quite dangerous I can say.

  31. ovosi ayodele says:

    Welcome to Reality International.Nothing could describe my trades more accurately than this article.These things happen everyday.But what is surprising to me is that once Iam sitting in front of the computer with my charts ,ready to trade,all these knowlege fly away.I become another person entirely.I will get on top of my trading career.

  32. kamal says:

    thank you Nial, its very useful

    thanks again..

  33. John Docherty says:

    Poignant illustration of my biggest hurdle. Thank You!!

  34. Justin says:

    Yet again wise words. Thanks Nial for all your efforts.

  35. Terhile says:

    “Do you ever stop trading for a while after hitting a few losing trades just because you think if you ‘wait it out’ your bad streak will end?”
    This perfectly describes me! Thanks for the insight Nial

  36. Vijay says:

    Thank you nice article.

  37. Taranjeet says:

    Another Great Article..thanks Nial…

  38. Emeka Anoliefo says:

    Thanks Nial God Bless You. Because it seems you are talking to me.May God help me In Forex Trading.
    Bye Nial
    Keep it up.

  39. Bill Huff says:

    As usual Nial makes a lot of sense. Whether you use his method or not, this article is damned good advice. If you are using one of those $97 get rich robots you might want to look at Nial’s method instead – if you have any money left. :)

  40. mark says:

    Great article Nial, I used to make these mistakes but now I’ve learnt from them. Now I just trade the daily charts as you recommend and I only spend about 20 minutes a day analysing them. Once you have your strategy you just have to stick to it, if you can’t spot a trade after about 10 minutes of looking through your charts its probably not there :) Thats what I find… in which case, switch them off and wait for the next day.

  41. Steve says:

    Fantastic info Nial, Can relate to this :) – Keep up the great work mate

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