EMOTION - DOUBT
Doubting your trades and analysis can be just as dangerous as having no trading plan at all. When we doubt our decisions or second guess our analysis it shows that we’re either not ready for the step of trading a real account because we’ve maybe just started and not confident in our game plan which leads to over thinking everything.
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A good trader makes a trading plan, knows exactly what they are looking for and sticks to it. Whether that is support and resistance or someone who’s a bit more conservative that would want four solid confluences before they jump into a trade. It doesn't matter which one you are, if you’re confident in your trading plan then stick to it no matter what.
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So whether you win or lose the trade you know that you followed your trading plan instead of maybe irrationally jumping in or out. Another reason why a trader might doubt themselves would be if their risk to reward ratio isn’t good enough. This is easily fixed, if your minimum requirement of risk to reward isn’t met when your about to enter your trade, no matter how good the set up looks, DON’T TRADE. The minimum risk reward ratio we recommend using is a 1:2 risk reward.
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Remember that the market is a never-ending stream of opportunities, don’t feel like you have to enter thinking you will “miss out” there’s always another opportunity around the corner. Simple adjustments and rules such as minimum 1:2 risk reward ratio, is what can change a trader from a ‘hit and miss’ trader to a consistently profitable one.
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Risk Management also plays a massive role in placing doubt into people’s minds when they are trading. The problem is most people don’t apply the correct risk management rules, they just want to make as much money as they can, as fast as they can. If you are risking too much money you may even doubt a perfectly good setup whilst in the trade. For example price may go against you 10 pips and because you’ve risked too much per pip, you irrationally close the trade in a loss thinking you will lose more. But as you watch the trade you then see it would have gone into profit.
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Once you then see the trade go the way you thought, this could lead to you jumping in late not wanting to miss out on profits which leads to a whole new set of problems because you would be acting irrationally; not thinking about the money management rules.
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Irrational trading leads to a lack of risk management, which inevitably leads to big losses.
