This lesson cost me $4000 to learn. Here it is…

Disclaimer: These ideas are my own. They are not the only rules.

When I first started trading, I was learning with some traders that were hitting 7–10 trades in a day.

Don’t get me wrong. Some of these guys were doing well. I thought I sucked because I couldn’t keep up… I lost a lot, and it seemed like everyone was winning except me…

One day, I traded so much that I ended up hitting loss after loss… accumulating over $4000 in drawdown.

My emotions were so high after each trade. The rush, excitement… when I won a few, it was exhilarating. But when I lost 4 or 5 trades in a day, it felt like total depression.

Here’s what I personally learned from this all those years ago…

If you take less trades, you will make more money. Why? You’ll develop the 1 fundamental trait required to be a trader.

Restraint.

Most successful traders will tell you that your trading psychology is what separates you from successful consistency, and failure.

The more trades you take, the more edge you’re psychologically expelling.

Taking less trades means your less likely to lose restraint, because you naturally create less chances of loss.

The more chances you take, the more errors you can make, the more restraint it will require to prevent over trading.

Every loss you take gets you closer to losing the ability to exercise proper restraint, which in turn just ends up resulting in dumb decisions.

Impulsive FOMO-esk behaviour turns you into a trigger-happy moron. You end up entering positions without a second thought, no analysis… just purely “ah, I lost a trade, I can probably make it back with a tiny scalp and get back to where I was…”

No you can’t. You’re going to lose.

The way I see it is that if I’m not exercising restraint, I’m acting in a FOMO-state.

When FOMO hits, my trading plan is basically non existent.

You toss it aside because you think “this time is different.”

Again, not it isn’t. You’re going to lose.

Consistency comes from sticking to a plan, not from reacting to every market twitch like a junkie needing a fix.

You’re not trading; you’re gambling… badly may I add.

You know what else happens when you start over trading in a FOMO state? Risk management takes a nose dive.

You enter trades without stop losses because you’re chasing a high, and think you can simply beat the market by just “staying in the trade till turns around”. I see it on this sub all the time… the amount of people jumping into markets without a stop loss is insanity… but, it’s extremely common behaviour, since it ties into our crappy natural instincts to “go big or go home”.

Guess what happens next? You got it. You’re going to lose.

You lose big, and you can’t go home because you blew your cash and your mortgage has defaulted 😅

FOMO puts you on a shitty emotional rollercoaster. The moment you’re on top of the world, the next you’re in the depths of despair. This yo-yo of emotions kills your clarity. To trade consistently, you need to be calm and disciplined. FOMO makes you anything but… whilst restraint in fact builds the skills we need to remain disciplined.

Nerdy time; Our brains are wired to crave social inclusion and avoid missing out on rewarding experiences. That fear triggers the same parts of the brain associated with physical pain. Our brain think that missing out on a trade is as bad as a kick to the nuts… Evolution made sense of this when being left out meant death (being eaten by lions). Now, it just means you’re screwing up trades :)

Your amygdala — that part of your brain responsible for fear — goes haywire when you think you’re missing out. It hijacks your logical thinking, leading to impulsive decisions. Cognitive biases like confirmation bias make it worse because you start seeing only what confirms your fears and ignoring everything else, so you end up taking terrible trades.

How can we develop proper restraint?

Honestly, this is so easy it feels stupid writing it. You already know this, but here you go anyway;

If it wasn’t clear, my advice really is… just wait.

Wait.

Happy trading 🙂

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