Acting on Impulse

Have you ever ditched your trading plan? If not, you should read this anyway because you’re most likely lying. If you have, why do you think you’re so “unfaithful”?

Do you blame it on your personality? Temporary insanity? Or an excuse that it’s just part of trading?

You might actually be right. There are many factors that could contribute to your lack of discipline.

Depending on your personality, background, training, and experience with the markets, you may have trouble controlling your tendency to act on impulse.

For some, impulsivity is in their blood. They have trouble concentrating. They are easily bored. They look for quick thrills for relief. For others, impulsivity is related emotional weakness. Some people have so much trouble controlling their emotions that they react impulsively out of frustration.

Temporary setbacks are inescapable when trading. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly distressed, and may close a position early, or in a fit of frantic, make a major trading mistake that can only be fixed by closing the position.

No trader is perfect; any trader can act impulsive at times. Research has shown, for example, that when people are tired, they have difficulty concentrating. As much as your conscious mind cares about sticking to your trading plan, your unconscious mind thinks, “Who cares? I just want to get this over so I can chill out.” Your psychological resources have been exhausted. When you push yourself to the limits, you’ll have trouble concentrating on your trading plan and obeying it.

Other traders may be impulsive because they lack experience. You can’t expect to stick with a trading plan when you don’t know what the heck you’re doing. If you’re new to forex, you’ll lack confidence and feel uneasy. You’ll start hesitating to pull the trigger. You won’t want to risk your money because you don’t have that strong belief that your plan will produce a profit that seasoned traders display.

Trading plans must be clearly defined and easy to follow. When you have an incomplete trading plan where important parts are left unclear, you’ll have trouble following it. A trading plan should consist of clearly defined entrance and exit strategies. Signals that indicate how the trade is going are also important. Don’t underestimate the importance of clearly mapping out a trading plan. You can’t stick with a trading plan that you can’t follow.

The winning trader is the disciplined trader. Disciplined traders stick with trading plans. They don’t act on impulse. It’s essential that you identify the reasons you find yourself trading on impulse. It could be your personality or it may be situational, but whatever it is, you must gain awareness of these factors and resolve them. Once you control the urge to act on impulse, you’ll trade more profitably.

Here is a guide on how to build your trading plan.

  • sribala

    It is fact that without proper planning we cannot execute or trade online.. My friends make profit by doing online Currency Trading from one of the website link to iknon-royal.com

    Do you suggest doing trade on unknown website or mediator like the above that I mentioned? Am confused and wanna safe before getting in to that..

  • sribala

    Sorry for the wront URL on my previous comment..

    It is fact that without proper planning we cannot execute or trade online.. My friends make profit by doing online Currency Trading from one of the website link to ikon-royal.com Do you suggest doing trade on unknown website or mediator like the above that I mentioned? Am confused and wanna safe before getting in to that..

  • kuiwik

    too true it’s another piece of the puzzle that need to be sorted.
    i am constantly talking to myself:)

  • sribala

    It is fact that without proper planning we cannot execute or trade online.. My friends make profit by doing online Currency Trading from one of the website link to iknon-royal.com

    Do you suggest doing trade on unknown website or mediator like the above that I mentioned? Am confused and wanna safe before getting in to that..

  • sribala

    Sorry for the wront URL on my previous comment..

    It is fact that without proper planning we cannot execute or trade online.. My friends make profit by doing online Currency Trading from one of the website link to ikon-royal.com Do you suggest doing trade on unknown website or mediator like the above that I mentioned? Am confused and wanna safe before getting in to that..

  • kuiwik

    too true it’s another piece of the puzzle that need to be sorted.
    i am constantly talking to myself:)

  • JLane

    “Failing to plan is planning to fail”

  • JLane

    “Failing to plan is planning to fail”

  • doggie01

    Great post. Thank you

  • doggie01

    Great post. Thank you

  • gthedrum

    True that tiredness exhausts psychological resources. I live in the UK and trade during the London session. My training programme suggests 7am to 10pm and 1pm to 3pm as the busy periods. However, whenever I entered a trade in the early part of the first busy period, I often found I was subject to whipsaws and reversals on my positions.

    This may be down to overlooking one of my checklist tasks from my trading plan, but on reading Mark Douglas’ The Disciplined Trader: Developing Winning Attitudes, he points out that it’s not wise to trade in the first hour after waking.

    When you consider that many of the best moves are just before or after the start of the busy periods mentioned above, trading after the first hour would mean missing out on a lot of good profit opportunities.

    The work around? I get up and log on an hour earlier! Doing this means I’m completely awake and less likely to miss that crucial checklist step. It also means I’ve had an extra hour to study the markets before the busy period begins.

    Good topic.

  • gthedrum

    True that tiredness exhausts psychological resources. I live in the UK and trade during the London session. My training programme suggests 7am to 10pm and 1pm to 3pm as the busy periods. However, whenever I entered a trade in the early part of the first busy period, I often found I was subject to whipsaws and reversals on my positions.

    This may be down to overlooking one of my checklist tasks from my trading plan, but on reading Mark Douglas’ The Disciplined Trader: Developing Winning Attitudes, he points out that it’s not wise to trade in the first hour after waking.

    When you consider that many of the best moves are just before or after the start of the busy periods mentioned above, trading after the first hour would mean missing out on a lot of good profit opportunities.

    The work around? I get up and log on an hour earlier! Doing this means I’m completely awake and less likely to miss that crucial checklist step. It also means I’ve had an extra hour to study the markets before the busy period begins.

    Good topic.