Why Traders Knowingly Make Mistakes In Forex Currency Trading
Why Traders Knowingly Make Mistakes In Forex Currency Trading
by Brian McAboy
It often happens in Forex trading that people will knowingly make decisions that result in lost profits. Now we’re not talking about losing trades that come about because of testing out a Forex trading system or a specific combination of indicators. Nor are we looking at simple errors committed purely by accident. If our objective is to profit, then why would we do these things that are clearly against what we know to be right? This phenomenon has many very unpleasant results that are experienced quite regularly in the Forex trading world.
The Trader’s confidence can take a severe blow when these events take place on top of losing money. Additionally, the trader will then engage in quite a bit of putting oneself down for having made the mistakes. Depending on the magnitude of the error, this can be the start of a rather vicious cycle that compounds the problem and sets the stage for recurrence. Until the source of the issue is discovered and the person does something to address it, the self-sabotaging behavior is likely to continue. Experienced traders can encounter this as well.
Let’s look at a real life example. One such trader (a real person that we’ll call Mark) of over 50 years had been going through this repeatedly for over a decade since he started trading from home. Mark has done just about everything there is to do in the futures industry. He worked on soybean farms and at the shipping docks loading ships and coordinating orders and shipments. For about another decade, Mark was on the floor of the exchange running orders. After that, he worked both for and as an introducing broker in the commodities industry until he decided to retire at the age of 59. Needless to say, Mark had plenty of experience in trading, but for nearly 15 years, Mark has been losing money because he enters trades without an exit plan. So why does he keep doing it?
Mark knows how to trade. As a broker, he was very successful. He’s tried just about every strategy and system there is. He’s pretty intelligent and knows his way around the computer and what he’s looking at on the charts. Mark loves trading and is excited about getting out of bed every day to get busy with his trading. On a typical day, he might make $600 or lose $800. Most often times he loses. When his wife gets home from work (yes, she still works at the age of 70), he’s usually brooding in his recliner after kicking himself and calling himself “stupid” or “idiot”. In all these years, he still has yet to end a year in the black. He’s also concerned about how much longer his money is going to last.
When asked why he continues to trade this way, and why he doesn’t pursue a strategy that he knows can make him money, he simply says that he doesn’t because they are boring. This is a simple fact: a well-planned trade, where you have already determined what you’ll do before you get in regardless of which way the market moves can be very boring. The suspense can be very intense when you enter trades without a plan, or if you’ve deviated from your system.
As humans, there is a part in all of us that craves excitement. Why do people take the time to sit through movies instead of going straight to the end to see if the hero triumphs or fails? Why do millions of people watch football games, rather than simply check the scores in the morning? It is the suspense, the excitement of not-knowing the outcome, that brings the excitement. The moments that are most enjoyed and fully hold our attention are when the ball is in the air and hasn’t been caught yet, when the hero’s fate hangs in the balance. The desire for the emotional rush is what is satisfied.
Consciously, making money is what everyone desires (afterall, who doesn’t?). Many people decide to become traders because Forex Trading offers the opportunity to realize very significant monetary gain. The danger is that it also offers the thrill that another part of us craves at the subconscious level. If that part of you isn’t being satisfied through other channels of your life, it is highly probable to seek fulfillment in your Forex Trading.
The results can be disastrous if you are experiencing excitement from not-knowing the outcome in your Forex Trading. What you need to do is to include activities in your life that provide sufficient excitement, and be okay with it if your trading is not so exciting - but making money.
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