In life, we all expect success, fear failure, so that we are timid, cautious.
But in currency trading, as strange as it may sound, many traders are afraid of both losses and gains.
Isn’t currency trading for profit?
Why are you afraid of making a profit?
But it is true that some traders are even more afraid of making a profit than they are of making a loss, vacillating before entering the market and hesitating when it is time to move.
The fear of loss is a common negative psychology, but the fear of profit is more frightening than the fear of loss.
What is Fear profit? Fear profit in foreign exchange is an immature mentality, just like a child to his favorite toy. The toy is put away, but it still needs to be taken out every once in a while for fear of being taken away or broken.
Would you believe it if I told you that some people are afraid of making money?
You may think this is a bit ridiculous, but isn’t the purpose of our trade to make money?
Why would anyone be afraid of making a profit.
In fact, surveys show that many traders suffer from this psychological affliction: fear of loss as well as fear of profit.
Many people may not understand what the fear of profit means. Before explaining this concept, it is worth recalling whether you have ever been in the following situations: 1. After placing an order, you could not calm down and always looked at your account every once in a while.
2, it is rare to do the right direction, and set the stop profit, but the closer the market is to the stop profit point, the more nervous you will be, very not the market immediately hit the stop profit, or even afraid of the market suddenly turn around, give up the stop profit, in advance.
3. Instead of sleeping better after a profitable run, you often worry that you’ll wake up right back where you started.
This worry causes you to keep up at night, check your account repeatedly, and eventually leave early.
These are all signs of a fear of profits, or more precisely, of holding on to the profits you’ve earned.
As a result, they may have missed out on the bigger market ahead.
In psychology, there’s a more technical name for this phenomenon, the “Jonah complex.”
In fact, profits are more dangerous than losses, because people subconsciously think of floating profits on their books as “their money.”
The pain of losing 100 yuan is greater than the happiness of gaining 100 yuan. How much confidence and joy an account surplus brings you will be more painful when it returns.
So after a book gain, volatility gives traders more fear than joy.
So leaving early seems like a way to avoid the pain.
In fact, it is not, because it is OK to stop earning in advance, but once you are wrong, you may suffer more pain and regret later.
A trader who leaves early may miss out on a better move later, which is penny wise and pound foolish.
Some people may be more Buddhist, it doesn’t matter.
But most people will regret this situation, because human nature is greedy, especially when it comes to money.
The way you plan it, a trade that could have earned 10% ends up earning 5% or less.
I’m sure most of us would regret this situation.
Because the most painful life is often not failure, but I could have.
In addition to the consequences mentioned above, the fear of profit for traders is still more damaging.
One of the basic features of the Jonah complex is an escape from growth.
This can be fatal for a person who wants to trade for a living, because it prevents you from going further down that road.
Fear of earnings may sometimes allow you to dodge a pullback and hold on to some of your profits.
However, in the long run, this is not a good thing, but a bad thing.
Even if you cut early, the market does turn.
At this point, most people, in addition to feeling grateful, must feel that they have been wise to show up early.
It gives people a lot of confidence that they’re trading better.
But in fact, your early exit is only because of the fear of profit taking, not because you know the market.
As a result, you may get caught up in blind optimism and confidence and misjudge your abilities.
When a person overestimates their ability, from the loss is not far away.
Coming out early because of fear of profit also interrupts our trading plan, which we already have in place with entry, exit, stop, etc.
But once the early profit taking, the plan will be disrupted, which is not conducive to our building and improving our own trading system.
In this light, fear of profit may seem like a small gain, but it is actually a big loss, and it allows traders to unknowingly avoid growth.
The Root Cause of Fear of Profit Now that we know how harmful it can be, we need to find the root cause of this negative psychology and find ways to deal with it.
The main reason traders are afraid of making a profit is because they are not confident enough.
This lack of confidence may come from the following aspects: 1. There is no trading system, or the system is not stable; 2. There are wrong expectations; 3.
1, relax the mentality, the correct view of profit and loss since it is the mentality of the problem, our first consideration of course is to find a solution from the mentality.
Whether it is loss aversion or fear of profit, we should first relax our mentality and learn to face profit and loss more calmly.
This may seem simple, but as anyone who’s ever done a deal knows, it’s not easy.
Because we face the fluctuations of money, it is hard to ignore, especially when the money is large.
Therefore, to learn to calm down in the face of profit and loss, you can try to reduce their positions, light trading, even if there is a floating profit and loss, it will not let people have greater emotional fluctuations.
In addition, we can downplay the importance we attach to floating profits and losses. We can emphasize to ourselves that floating profits and losses on our books are perfectly normal, that they are just the process of trading, and that we are after long-term results.
The profit and loss of a trade is nothing, let alone the floating profit and loss generated in the process of trading?
This depends on long-term actual combat training, the longer the trading people, accustomed to the account of capital rises and falls, in the face of floating profits and losses, the more peaceful mentality often.
2, make a plan, strictly abide by the trading discipline of clear plans and goals, sometimes can prevent people from a lot of impulsive action.
A lot of people may not have a clear plan when they trade, but they just go with it, they think it’s time to get in, they think it’s time to get out, and then they think it’s not going right.
Faced with this kind of chaos, we need to have a plan, strictly abide by the trading discipline, firmly follow the signals from the trading system.
The system tells you to reduce the position when the position is reduced, the position is safe to hold, the time to close the position do not have too much hesitation, everything in accordance with their own plan, rather than a hot mind at random operation.
If we can make sure that every trading step has enough logical support, even if the loss, it is just a perfect trading system.
In this way, we can avoid too much emotional interference in the trading process.
3, adhere to the recovery, face negative emotions after each transaction to resume, in-depth analysis of the reasons behind each transaction profit and loss, can let us find the problem in time.
It is worth noting that in the process of recovery, we should dare to admit and face up to the existence of negative emotions, and learn to reflect on the reasons behind and try to find solutions.
When we find ourselves leaving early for fear of profit, we can keep asking ourselves: Why was I scared?
Is it because of some unexpected situation or something else?
How often does this fear occur?
How do I overcome it?
Human psychology has a period of tolerance, through deliberate training and tempering can reduce the impact of negative emotions on trading.
4. Set Reasonable Expectations. As mentioned earlier, false expectations can also make traders fearful of making profits.
This is because traders who are too eager to make a quick profit in the early stages, always looking for a “top” or “bottom”, are more likely to fail.
After a few failures, a trader’s mentality often changes, and he becomes afraid of making a profit and wants to get out of the bag at the first sign of a gain.
The market is so volatile that “buy at the bottom, sell at the top” is as difficult as finding the holy grail of trading.
Don’t be too greedy in your trading. It’s good to be able to capture the middle of the market.
Therefore, we should set a reasonable expectation when trading, so that we can not only have a realistic stop position, but also get a reasonable return.
5, understand the characteristics of the market, do their own familiar varieties each market and trading varieties have their own rules, some volatility is relatively large, some varieties are very sensitive to the fundamentals.
For example, the volatility of a straight dollar pair is generally higher than that of a cross.
If you don’t have a clear understanding and grasp of these most basic market characteristics, you will be easily led by the nose of a little fluctuating profit and loss.
The fear of profit is a negative state of mind that can have a negative impact on trading, but it is also a common state of mind in our daily trading.
For example, the recent A shares, skyrocketing A shares hit the brakes (July 10), today there must be some retail investors scared, even if the account is still profitable, will be afraid of the final profit all back, and rush to sell.
Once out today, it could be much more expensive to get back in, unless you believe the market is due for a deep correction.
No matter what kind of products we do, if we want to make profits, first of all, we should not be afraid of making profits, not to avoid “fear” itself, but should face up to this kind of mentality and overcome it.
