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Psychological pitfalls

Day trading requires a clear mindset. The successful day trader possess discipline, not only about his strategy but also in relation to his consciousness about his mindset. This is an area with numbers of pitfalls and many traders make their mistakes exactly here, aware of it or not.

One element here is what we can describe as the inner ”fool”; an inner demon which will only harm you. In other words it means that the self-destructing mindset and acting herby should be defeated. It’s a demon all humans posses in their subconscious mind, which cannot be killed but controlled. The day trader should through his consciousness increase his skill to aware trades which he deep down knows are not appropriate. Basically this is a matter of learning and getting better to understand yourself at this level and decide what you find the right thing to do. It may sound strange but the truth is that many – particularly new players – relatively often will perform loss-making trades which they in reality and in advance of executing the trade clearly know was not rational.

This element relates to a certain extent to one of the potential dangerous pitfalls for traders and investors, namely greed. As day trader it is extremely important learning the skill to control your psychological related weaknesses in general, including greed. This will among other things appear in form of the above wrong dispositions. Greed can divert attention and blur the clear view; in short strongly be contributing to inappropriate trades.

The second of the psychologically pitfalls is surprisingly not fear, which typically can be very growing. These two conditions – greed and fear – should the day trader actively seek a high level of awareness about. This condition of self awareness should be reached because it is the foundation of being able to work with the two conditions. Being able to control your psychological pitfalls is an absolute must for the day trader which continually is seeking success within the area.


Strict discipline is in this connection two important keywords, as the level of fear indirect can be reduced by strictly following your strategies. By following your strategies which among other things requires demand for levels of stop loss as well as protect profit you can avoid steep down trip journeys which is a highly contributory factor for fear to grow in the traders mind. If you for example burn your fingers tremendously on bad executing of a normally interesting setup it is very likely that you’re not able to or don’t dare to execute next time you see this type of setup. This will happen only because you – aware as well as unaware of it – will focus on the similarity of the two situations. Hereby a large possibility of missing the executing of the trade will take place in spite that you deep down feel that the given setup looks profitable. If you never had burnt yourself tremendously in the beginning by just following your strategy, you also would have executed the trade in the future.


Flemming Kozok and the Bull on Wall Street, november 2006. (Private photo)

The Reverse of the Medal

Although the day trader achieves success or not there will be a high risk that he will be mentally loaded by his day trading activities. How much he will be affected can vary from person to person. Even if he is at the top of his yield curve he will in all probability have experienced things which continuously have weakened – or in best case strengthened – him mentally. The risk for considerable negative mental side effect is increased, including that the hard-working and active trader who follows the market as he should, namely very intense, unfortunately almost constantly will operate under very high stress levels. Provided he is exposed consequently and in longer periods as the day trader who will earn a living is supposed to do severe stress loads will have – as well known - related negative side effects. Therefore it will show up important to keep the body in good shape, maintain social activities, eat healthy, etc. in order to keep up with the clear mindset which as earlier mentioned is a must for the active day trader.

In addition to this the potential day trader should consider thorough how day trading activities can be consistent with a possible family life. In this relation it should among other things be considered – excluding the naivety – if you are able to be strong and capable of handling the other demanding task in life, also in or after the uttermost dark hour in the market.

Finally it should as a matter of form be mentioned that day trading is a very complicated discipline to achieve success within on a continuous basis. If you seek your fortune inside this area it as an absolute must to be aware of the considerably risks connected with the activity.

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