The psychology of trading is the hardest aspect to deal with.
See, for the past 3 months, I did not trade much because I did not feel confident enough to enter.
Looking back, this was mostly because my positiions were too big for my account. That thought of a bigger loss in case the trade goes south, scared me.
My solution to overcome this fear is to trade smaller (just 50-100 shares per trade) for at least the whole of February. This way, I can focus all of my attention on finding ideal setups and executing each trade according to my plan.
Then came yesterday...
Yesterday, I found $DPW. I know this ticker and I know that it can spike.
It had a great intraday HOD breakout setup around $1.40, with a strong support level around $1.35. With a very conservative plan to enter it for a break to $1.50, this would have given me at least 2:1 reward/risk.
The chart had room to reach at least $1.60 (which it did), potentially even $1.80.
So, with such a great setup, my plan to just focus on improving my trading performance (especially my winning %) went out of the window.
I entered a vicious circle:
Greed kicks in -
greed leads to recklessness -
recklessness leads to considering bigger positions -
considering bigger positions leads to imagining a big loss in case the trade goes wrong -
imagining that big loss leads to thinking about just going in smaller -
which leads to greed kicking back in, suggesting bigger postitions -
this all leads to hestiation to enter the trade -
and that hesitation leads to missing the optimal entry -
which ultimately leads to missing the trade because I don't want to chase.
Yap, in the end, I did not take that trade. Instead, I watched it from the sidelines, doing exactly what I thought it would do.
And this, really (at least for me) feels worse than taking a loss. That feelling of actually being right, but tricked out of the trade by my own mind.
It's tough to break behavioral patterns. But that's something I have to overcome soon.
I really need to stick to my original plan and not to change the plan seconds before I want to enter a trade.