RUMINATION IN TRADING

2 Mar

👋 Hello, Forex traders!
Let's talk about rumination in trading. What is rumination? Rumination in trading is the process of going over previous trades and market situations in your head. Trying to understand what went wrong and to think of a better way of doing things. In "moderate doses" it is analysis. But when a person thinks about it all the time and in a negative way, analysis turns into mania and "self-beating" for mistakes made.

Differences Between Rumination and Analysis ❓
Analysis is an essential part of learning to trade. It involves fixing all actions in a table editor, on paper, or uploading history from the platform. Traders analyze their best and worst moments, identify mistakes, changes in risk level, and successful trades. They also look for ways to optimize their trading system. Rumination, on the other hand, is obsessive thinking with an emphasis on the negative. It involves constant "chewing" of negative moments without searching for a solution. A stock or crypto you bought went down sharply, and all your thoughts are occupied with why it happened and how to fix it.

Rumination in trading is the habit of endlessly worrying about and analyzing your trades, mistakes, losses or missed opportunities. It can lead to negative thinking, pessimism, depression, anxiety, impulsiveness and inactivity. Rumination prevents a trader from focusing on the present and the future and following his trading strategy and discipline. Rumination, instead of analyzing, improving and solving a problem, only makes the situation worse.

Causes of Rumination in Trading 📋
• Lack of confidence. A trader who is insecure is constantly trying to look for mistakes in his previous trades to justify his failures.
• Fear of failure. A trader who is afraid of losing money is constantly running through possible failure scenarios in his head to try to avoid them.
• Striving for perfection. A trader who strives for perfection is constantly trying to find ways to improve his or her results, even if they are already quite consistent with expectations.


Consequences of Rumination in Trading ⭕️
• Decreased trading efficiency. A trader who is constantly replaying past trades in his head cannot focus on the present and make the right decisions.
• Loss of money. Rumination can lead to impulsive trading decisions that can lead to losses.
• Mental Distress. Constantly running negative thoughts through your head can lead to stress, anxiety, and even depression.

How To Avoid Rumination In Trading ✅
1. Set limits on the time you spend analyzing past trades.
2. Focus on what you can control.
3. Develop positive thinking and self-esteem.
4. Determine your trading goals, rules, risks, and plans in advance and stick to them.
5. Keep a trading diary where you record your trades, results, mistakes, lessons learned, and emotions.
6. Limit the time spent analyzing charts, news, and forums.
7. Take time away from trading, pursue other interests, hobbies, friends, and family.
8. Find ways to relax and de-stress: meditation, sports, music, reading, etc.
9. Mentally prepare yourself for the worst-case scenario before entering a trade.
10. Every night before you go to bed, think of three good things that happened to you during the day.


Example ✍️
You buy EURUSD with the expectation of growth. But there is a downside risk. Prepare yourself mentally for the fact that there are all the prerequisites for the fall of the pair, and you are ready to accept losses. If the price has reached the stop loss, take it with the thought "It is good that it is so, otherwise you could have lost even more" and go to rest. Ask yourself: what is the worst that can happen and how can I deal with it?

In conclusion, rumination in trading can be detrimental to a trader's success. By understanding the differences between rumination and analysis, identifying causes, and implementing strategies to avoid rumination, we can improve our mental well-being and trading performance.

Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment