Trading psychology
There is something about trading psychology that I cannot overcome.
It’s an enduring optimism that the decision I’ve made in a trade is
right. I tend to hold onto a trade until I’ve lost at least 30%. At
that point I start to worry. I start to read articles looking for
reasons that I can use to bolster my opinion that the market will move
back my way in a short time. When I reach the 40% loss area, if I’ve
had cash on the sidelines I want to pour it in to lower my costbasis. I
think to myself that if I wasn’t right when I placed the trade, if I
could only buy in at the current depressed level I would surely be right
that time. It’s really a horrible trading psychology to have. So far
it’s been really hard to change.
I have heard that once a trade starts to go against you, you ought to
play it the other way. Swap out of your position, and take the opposite
action. If you’ve bought a put option for 1.00, with a 0.7 delta, and
the spread is now 0.9 by 0.95, sell out and buy the opposing call.
I have been unablr to put that into practive because I always believe
that the market is just tricking me into thinking I’m wrong. I think
that as soon as I take a realised loss and reverse my position, the
market will reverse as well.
So far, my psychology has really gotten in the way of successful
trading. I’ve got to try and change it somehow before I’m out of the
game.