Mental block in trading
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A mental block is a psychological state that prevents you from trading. The desire to trade is there, but one thing blocks you and you can no longer open a position on the financial markets. The reasons for a mental block are many and varied. It has large consequences in the trader's life but don't panic, this mental state can be overcome. Mental blocks happen when using a real account.
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The causes of mental blocks in trading
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Long loss phases
: All trading strategies have phases of gains and losses. A loss phase is obviously harder to deal with psychologically and you tend to want to question your trading strategy (even if you have tested it on a demo or it has already proven itself in real life), to doubt its effectiveness. A mental block in trading can then arise and the trader no longer takes into account the signals that his strategy gives him.-
Lack of confidence in a trading strategy
: Very often, novice traders do not test their trading strategy on a demo account or only to a limited extent. As a result, when they want to switch to a real account, they have no idea of the performance that the trading strategy can generate. This lack of trust in their trading strategy can lead to a mental block.-
Lack of self-confidence
: Novices ask themselves the following question: Am I capable of making a return on my capital. More experienced traders ask themselves the following question: Am I able to last in the financial markets? Or more generally: Am I cut out to be a trader? Simply asking this question can lead to a mental block if you are not very confident.-
Fear of losing
: To be able to win in trading, you have to accept losing. We regularly see it on the financial markets, novice traders do not accept losses: they do not place a stop loss; they move their stop losses so they will not be triggered, etc. A single trade is sometimes enough (with leverage) to raze their account! This fear of losing money is also found among more experienced traders who use large amounts of capital to trade. This money is part of their wealth, part of their savings, and losing it would be drastic! This fear can lead to a mental block in trading.-
Feeling overwhelmed by trading
: When you are in the learning phase, the more you learn, the more you think that trading is a complex activity. Sometimes we have the impression that we are no longer making progress, that we do not understand the market. A trading method cannot be learned by heart, you have to find it for yourself, it takes time and experience plays a crucial role. A trader can then tell himself that he will never get there and this can lead to a mental block in trading.-
Accumulation of losses
: When you start trading, losses are often significant. Setting up a trading account is almost part of the learning process (and that's why you always have to deposit a small amount at the beginning). I don't know many traders who have never razed a trading account. For some, the accumulation of losses (after a new deposit) can lead to being put off from trading. The trader will then tell himself that trading is not for him and he can then have a mental block. Instead of trying to understand his mistakes, the trader throws in the towel.-
Fear of winning
: Earning money from trading often leads to a feeling of guilt. We tell ourselves that we don't deserve this money, which sometimes seems too easy. Moreover, money can be made quickly in a few minutes or a few hours. We then tend to compare what we earn in life (with our profession) and what we make in trading (in a short time). We can then say to ourselves that it is not healthy, that it is not related to the values that our parents taught us and then a mental block in trading can occur.-
Fear of taking risks
: In trading, you don't make money without taking risks. The more risk you take (see level risk aversion), the more money you can make but the more you can lose! Simply risking some of your (often hard-earned) money can lead to a mental block.-
Lack of motivation
: For some people, trading is a hobby. There is no financial motivation behind it. They don't really need it to live and think that trading will not change their lives. On the other hand, they know that it takes a lot of effort to succeed. Without real motivation, a trader can then remain passive (while following the financial markets) and never makes an order on a real account. Even if he were to change his mind one day, this lasting passivity may have led him to a mental block in trading.-
Fear of degrading your image
: The financial world often has a bad image in many families. It is the embodiment of evil. François Hollande used it during his presidential campaign, shouting that he was going to wage a "war on finance". An argument that hit the nail on the head. We then say to ourselves that if we succeed in tradingwe will become like the people we hated for many years, and move over to the dark side of the force. Moreover, in France, making a lot of money is frowned upon. You have to explain to your loved ones how you earned this money and some people can’t shoulder it. As a result, a mental block can be created against trading.-
Afraid of realizing that you're bad
: Losing money in trading hurts one’s ego. It is like refusing to accept losses. For some people (especially novice traders), take a loss is an admission that they're not made for trading. This is obviously totally false. Losing is part of trading and you can't win if you don't understand that. Rather than risk offending their egos, some choose not to trade any more. It is a form of mental block in trading.The effects of a mental block in trading
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Frustration
: A mental block leads to frustration for the trader. He knows deep down that the mental block is not justified, but he can't overcome it. This impotence is painful. He then feels helpless, unarmed to fight this block.-
Anxiety
: Frustration can lead to anger against oneself but also against trading in general. The trader then disparages this environment, criticizes it openly on the forums, with his friends and relatives, etc. It is a way to escape frustration (which we can't fight), to try to get away from trading.-
Malaise
: A mental block causes a form of malaise, as if something is missing from your life. Failing in an activity is one thing, but failing without really trying is much harder to deal with. It gives the impression of unfinished business that psychologically eats away at the trader. He wonders what would have happened if he hadn't had a mental block. It is morally draining and leads to feelings of regret.-
Feeling belittled
: "Others can do it why can't I?” This how traders who are victims of a mental block think. They try to understand the reasons and realize that the problem comes from themselves. The trader then tells himself that he may not be cut out for trading and his ego takes a hit. "Am I worse than anyone else?“.-
Solitude
: it is often difficult to talk about a mental block in trading. People around you may not understand what you're talking about. Moreover, talking about it is an admission that you have a problem and we know that men do not like to show their weaknesses. They prefer to close in on themselves.How to overcome a mental block?
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Forget about trading for a while
: Over time, we forget everything. If you no longer pay attention to the financial markets, your desire to trade will gradually disappear and that will allow you to forget your bad experience (your mental block). By trying trading again later, you will be a new man. But be careful, if a mental block has occurred once, it may reappear. Trying to forget about trading is, therefore, not the best solution.-
Go back to a demo account
: A mental block happens when using a real account with money at stake. On a demo account, the pressure of money is not there and it can allow you to regain confidence in yourself and your trading strategy and to continue learning. The best way to overcome a fear is to face it. With a mental block, it's the same thing. However, this depends on the origins of your block. If the reasons are more deeply rooted and do not have a direct link to trading, a demo account will only extend the term.-
