Trading -- Five Common Psycho-Hurdles

Fear of Missing Out
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You missed a great opportunity yesterday. You take it as a mistake and don’t want to repeat it. So, today you enter in a hurry, deviating from your edge/strategy thinking that you will nail it this time. But that might not be the case.

Missing an opportunity, because it was not in-line with your back tested strategy, was perfectly fine. You were still following the right path. But after missing a couple of rallies, you decided not to miss the next one. This leads to disaster.

If you are missing too many opportunities and want to deal with it, then think of modifying and back testing your strategy.

Revenge Trading
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You take a long trade in the morning and stopped out in the just 15 minutes. You don’t digest this loss and want to recover quickly. So, you not just reverse your position but also double it. In the next candle market again stops you out, multiplying your losses.

Your first loss was still ok to bear with. But reversing and doubling was an absolute blunder. If you enter into a position as, per your edge, and got stopped out then consider it as a drawdown that one can face in any strategies. There are no peak without a valley. If you miss a valley, you will surely miss the peak too.

Greed Entering your Mind
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“If you do not book profits, you will book loss.”

You need to define two things while trading: risk involved and potential gain. If you have taken a trade and its not in favor, just do not average to bring down the cost. This oversize your position and eventually multiplies the risk.

Also, if you have set targets (price target or profit amount target), just exit (at least partially) there. Taking out profit from the market is of utmost importance as this is the prime objective of this business.

Waiting for too long, when in profit, may bring you back to breakeven in a volatile event. But if your strategy says to trail a profitable position, its perfectly fine to do so as you will be locking your profits.

Paper loss is Not Real
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Suppose you entered a trade at 500 and your stop loss is 490. The stock starts turning down and your PnL is in red. The stock is at 492 but your brain says its loss. This impression is so powerful that you could not stop yourself from closing the trade.

You placed the SL as per your plan. Any loss that you see before your SL hits is just a paper loss. You SL defines your real loss.

Lack of Discipline
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All the above hurdles result into lack of discipline, which stops you from being profitable.
You have to have a strategy/edge in the market with some back testing. Then you need to strictly follow that edge. You may tinker a bit with your edge if it is needed.

Discipline is nothing more than religiously following your plan of action. Putting efforts to train your brain against all the above psychological hurdles can make you a disciplined trader over a period of time.

There might be more psychological hurdles but I think these are the crucial ones to deal with.
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