Is Your Trading Brain making you lose money

By | October 5, 2013

During our training sessions with students we are very specific t make them understand you have lost money not because of market but the main reason is Your brain doesn’t like to lose.Its all there in your subconscious mind which is responsible for profit and loss for a trader.

Brain remembers everything.

How you trade in the future is often affected by the outcomes of your previous trades.  For example, you may have sold a stock at a 20% gain, only to watch the stock continue to rise after your sale.  And you think to yourself, “If only I had waited.”  Or perhaps one of your investments fall in value, and you dwell on the time when you could’ve sold it while in the money.  These all lead to unpleasant feelings of regret.

 

Brain is great at coming up with excuses.

Sometimes your investments might go sour. Of course, it’s not your fault, right? Defense mechanisms in the form of excuses are related to overconfidence. Here are some common excuses:

  • ‘if-only’: If only that one thing hadn’t happened, then I would’ve been right. Unfortunately, you can’t prove the counter-factual.
  • ‘almost right’: But sometimes, being close isn’t good enough.
  • ‘it hasn’t happened yet’: Unfortunately, “markets can remain irrational longer than you and I can remain solvent.”
  • Operators are making my trade go wrong
  • FII’s are manipulating the market.
  • The rally is going to fade than I will make a killing

Brain loves loss aversion

Loss aversion, or the reluctance to accept a loss, can be deadly.  For example, one of your trading bet may be down 10%.  The best decision may be to just book the loss and move on.  However, you can’t help but think that the stock might comeback.

This latter thinking is dangerous because it often results in you increasing your position in the money losing investment.  This behavior is similar to the gambler who makes a series of larger bets in hopes of breaking even.

5 thoughts on “Is Your Trading Brain making you lose money

  1. Bramesh Post author

    Thanks Ashish Sir..

    Your appreciation means a lot to me !!

    Rgds,
    Bramesh

  2. mahesh

    anybody leaving element of gambling from trading can be successful. this is my experiance..thankyou

  3. Ashis Maji

    As said earlier who reads and follow Bramesh’s every article, atleast never be out of the market. Thanks Bramesh god blessed you.

  4. vikas

    Dear Sir.
    Thanks for your article.

    You have rightly highlighted the importance of subconscious mind in trading.I too read few books like The Secret(Rhonda byrne),psycho-cybernetics(Maxwell Maltz),few books by Brian Tracy,Jack canfield etc where the role of Subconscious mind is being discussed.
    Here in trading i too want too improve by practicing this along with the technicals,fundamental news ,significant observation of price behaviour of particular counter ….so that i could keep on strenthening my trading acumen as well as overall trading.

    Your articles are excellent .
    Thanks for sharing.
    Regards
    Vikas

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