Chapter 16
Ten Psychological Traps to Avoid When Trading
IN THIS CHAPTER
Avoiding mental mistakes and behavioral errors
Sidestepping emotional and evolutionary pitfalls
In this chapter, I present you with a list of ten psychological traps to avoid when trading — a list you should always keep in mind whenever you have anything to do with the stock market. By no means exhaustive, this list focuses on a small selection of the potential dangers you might face simply because psychological pitfalls are sometimes highly individualized and depend to a great extent on one's character, abilities, personal strengths, and personal weaknesses. (Addressing each instance is beyond the scope of this book.)
Dismissing Demo Accounts Out of Hand
Beginners are often impatient and tend to overestimate their abilities. They rush in, open trading accounts, and listen avidly as their brokers encourage them to get started trading right away. Beginners are generally greedy, and the dream of earning easy money makes them cocky. Fools rush in where angels fear to tread, and the inevitable occurs: The psychological trap snaps shut and they end up having to pay out a lot of money for lessons learned.
That's why experienced traders truly appreciate their demo accounts. With paper trading, you get a chance ...
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