3 Ways To Prevent Getting Trader Block

by Trading 101     Jul 16, 2019

It’s common knowledge among traders that mindset is critical to doing well. The difference between a good trade and a bad trade can be the frame of mind the trades were made in. The concept of “Trader’s Block” is something rarely covered in a standard, cut and dry trading 101 guide.

Trader’s Block is a simple concept. It’s when a trader feels a mental block and finds themselves struggling to open new trades or close existing open trades. This is commonly experienced after winning or losing a trade. Consider adding this to your trading 101 knowledge so should it ever happen to you or a fellow trader, you know what to do.

For traders that just closed on a trade in a winning position, the block is often a result of performance anxiety. They’re worried they won’t be able to replicate their success or even feel like their next trade needs to be an equally large win.

For traders that just closed a losing position, the block often comes due to the fear of repeating the same mistakes and losing again, especially if that trade had been a part of a losing streak. This is also characterized by a loss in confidence and overly cautious approach to trades.

Here are 3 ways a trader can overcome the infamous Trader’s Block:

  • 1) Acceptance

Accepting the fact that there is a problem is often the first step to solving it. A lot of times traders that are suffering from this won’t want to admit it due to feelings of guilt or shame. Without acceptance of the fact that yes, there is a problem and no, it’s not impossible to overcome, a trader will find themselves hard pressed to improve.

Often understanding the fact that there is a problem is enough to solve it as the affected trader will realize they’re being irrational by caring too much about a single trade.

A common mistake here is the belief that time alone will heal all wounds – in this case, there’s a good chance that time will only make things worse, which could result in some really bad trades and losses as a result thereof.

  • 2) Performance Review

Not performance review in the context of a corporate function or anything of the sort. But if a trader is hung up on their last win or loss, looking at their trading history and subsequent historical performance can provide the insight they need to accept they have a problem and move on.

If the last trade result was a negative, it may help to assess what went wrong exactly and how to avoid it. Was it a failure in managing risk? Maybe a wrong approach to the market? Regardless of the reason, now that the problem is understood, it can be solved and avoided for the future.

In the case that the last trade was a winner and now there’s a level of performance anxiety, the trader needs to simply relax. They already did well to win that one, so look at the trade to understand what went well and what parts can be replicated for future trades.

  • 3) Reviewing Trading Strategy And Plan

Some traders simply need to take the time to review their trading principles and general approach to the market. By having a reminder of how they trade and what makes a trade successful, the fear of a single trade should marginalize and fade.

The reminder that their system exists for a reason and that they can believe in themselves to execute their own plan well is often the confidence boost a trader needs to get back at their desk and put some trades into the system.

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