Most of trader who are attracted to trading look at a price chart as below and think trading is very easy to make money. As shown in below chart Most of new traders have a thought process “If I had gotten in there, I could have made a fortune.”
Adopting such a perspective can lead many people to think day trading is relatively easy and a quick way to riches. But Reality is far different from the Fictional world of most of the trader. With my experiences of more than 15 years in Markets I can say one thing with confidence
Trading Profit is the “Hardest” Easiest Money Made
The root cause that makes trading so difficult is due to “Amygdala Hijack“.
Trading and money is akin to survival, it affects the part of our brain called the amygdala. The amygdala is an almond-shaped section of nervous tissue located in the temporal (side) lobe of the brain. There are two amygdala per person normally, with one amygdala on each side of the brain. They are thought to be a part of the limbic system within the brain, which is responsible for emotions, survival instincts, and memory. The amygdala is a section of the brain that is responsible for detecting fear and preparing for emergency events.
So if one wins a trade, there is great euphoria, followed by fantasies of wealth, if one loses, there is great pain, regret and frustration, usually followed by anger and revenge (trading) other typical trading Error.
Let me Give you an Example When You are Not Trading You are Like a Football Coach standing on the sidelines giving Suggestion, yelling at the players when watching a game.You should have done this or that. However, when an individual is IN the game, that objective perspective is replaced by a very deep and total animal sense of survival, there is very little to no subjectivity. That is why it is hard to see the market clearly when one has something at stake in it. You are mainly just focused on how near or far the market is from your Stoploss.
So to be good at trading, a person has to have a great sense of self awareness and emotional intelligence more than anything else.Trading is a Function of execution and we do execution we have to fight with our behavioral bottlenecks. Trader requires to think in “NOW” moment not what has happened in past.
Trading Mind is wired for 2 things we need to be concerned about
a. To Associate with outcome of Last trade
b. To avoid pain not to take Stoploss
The majority of trading is to dissociate with the emotions that arise as you watch the rise and fall of the markets. It is the ability to very gradually realize that what your emotions say is happening, meaning fear of loss (aka death) or hope of gain (aka safety and immortality), does not actually have any meaning. This takes effort and lots of practice and these Skills needs to be learned.
So if a trader does not recognize these Psychological Gaps, then no technique, strategy or amount of education will lead to success in the markets. This is why so many fail. It is not because they are incapable, it is because one has to first identify what really is the cause of their mistakes and then ALSO have the ability to change it.
The amygdala hijack reflex is hardwired into our systems that it is very hard to transform, BUT it can be done using Psychological Techniques which can lead you to a Path of Successful and Profitable trading.