2 Ways to Stop Forcing Trades

05/21/2012 10:00 am EST

Focus: TRADING

Gary Dayton

Founder, TradingPsychologyEdge.com

Even experienced traders fall victim to forcing trades even though a quality set-up isn't there, says Dr. Gary Dayton, who shares two tips designed to curb this often costly habit.

Traders sitting in front of the monitor watching the markets and not seeing a trade may force one just out of boredom; not something you want to do.

Our guest today is Dr. Gary Dayton to talk about that issue. So Dr. Dayton, traders sometimes feel we must be in the market, and it can force us to take trades we shouldn’t be taking. How do you avoid that?

That’s a good question Tim, and it’s not just new traders, it’s some of the old, seasoned traders as well. 

No question about it, trading can be boring, and if you’re sitting in front of the screen all day, it can be like watching paint dry from time to time. 

I was in a live trading event not too long ago and the market was just a dead, flat market. There was nothing happening, and traders started to show all the characteristics we commonly see from boredom. They started to get distracted; some were surfing the Internet rather than looking at the screen; others were chatting; and still others were dropping down a time frame to see if they can find a trade there. They were trying to make what I call a “boredom” trade: trying to force a trade that really doesn’t exist.  

When we’re bored, we lose interest in the immediate experience. Our mind doesn’t feel challenged, and the mind starts to demand more novelty, more stimulation. It’s the mind telling us that, “Hey, I don’t like reality.  Change it.” 

So responding to our mind in that way gets us into trouble, as I saw in that live trading event. Traders start to get distracted and suddenly the market takes off and they’re not on board and they’re watching it.

Or, as I say, the boredom trades; they’re trying to force something and they get chopped up. That’s real easy to do.

Well it’s not the situation that’s really the problem; it’s more our response to it, and even more accurately than that, it’s not even our response to the boredom as much as it is our response to our minds’ demand for more novelty and stimulation.

We’re responding to the mind and so we start to believe these thoughts. We start to buy into these thoughts that “This is so boring. I need to have some excitement,” and so we want to escape and we start to make theoretic trades or get distracted and lose focus.

So here are a couple of quick tips. One’s a real simple one: take a break. Take periodic breaks throughout the day.  It’s simple, but many people forget this.

Every hour, take five or ten minutes off, and when you do this, don’t sit there and start surfing the Internet. Get away from your trading desk, go off and take a walk, get a snack, do a little excercise. Do something different.  It gives you that mental break so that when you come back to the trading desk, you’ll be a little more fresh.

The other big tip is to begin to become aware of what’s going on between the ears. Start recognizing the stories or the things that we’re telling ourselves. What is the mind saying to us? 

When we start looking for trades or when we start surfing the ‘net because we’re bored and we need to have some more stimulation, recognize that. Recognize that for what it is, and then ask yourself, “Is this really helpful to me and my trading?” and then make the right choice.

Alright so just recognizing it sounds like it can keep you from getting into that bad trade when you shouldn’t be in it.

Yeah, definitely. The mental awareness of what goes on between the ears—what the mind tells us—is so important in trading. 

It’s so important in life, but in trading, in particular, it’s very important. It’s something that we all need to focus on.

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