Forex trading should beware of emotional "butterfly effect"

American social psychologist Festinger (Festinger) has a well-known judgment, known as "Festinger's law": 10% of your life is made up of what happens to you, and the other 90% is what happens to you. The % is determined by how you react to what happened. In other words, 10% of things in life are beyond our control, while the other 90% are within our control.

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Festinger gives such an example in the book. ​

When Kastin got up in the morning and took a shower, he put his high-end watch by the sink. His wife was afraid of getting wet, so she took it and put it on the dining table. When the son got up and went to the dining table to get bread, he accidentally hit the watch on the ground and broke it.

卡斯丁疼爱手表，就照儿子的屁股揍了一顿。Then he scolded his wife with a dark face. The wife was not convinced, saying that she was afraid that the water would wet the watch. Castin said his watch is water resistant.

So the two quarreled violently. In a fit of anger, Kastin didn't even eat breakfast, and drove directly to the company. When he was about to arrive at the company, he suddenly remembered that he forgot to take his briefcase, and immediately turned back home.

But there was no one at home, his wife went to work, his son went to school, and Castine's key was left in his briefcase, so he couldn't get in, so he had to call his wife to ask for the key.

When the wife rushed home in a panic, she knocked over the fruit stand on the roadside. The stall owner stopped her and refused to let her go, demanding compensation from her. She had to pay a sum of money to get out.

After getting the briefcase, Kastin was 15 minutes late, and was severely criticized by his boss. Kastin's mood was extremely bad. Before leaving get off work, I quarreled with my colleagues because of a trivial matter.

His wife was also deducted the full attendance award of the month for leaving early. His son participated in the baseball game that day. He was expected to win the championship, but he didn't perform well because of a bad mood and was eliminated in the first inning.

In this case, the broken watch is 10% of it, and the following series of things are the other 90%. It is all because the person concerned did not control the 90% well, which led to this day becoming a "troublesome day".

Just imagine, if Castin reacts in a different way after the 10% is produced. For example, he comforted his son: "It doesn't matter, son, it's fine if the watch is broken, I'll take it to repair it." In this way, the son is happy, the wife is also happy, and he himself is in a good mood, so everything that follows will not happen .

It can be seen that you cannot control the first 10%, but you can completely determine the remaining 90% through your mentality and behavior. I call the above the "butterfly effect" of emotions.

The above is about controlling and controlling one's emotions, and reducing more disadvantages and losses caused by irrational words and deeds. So is trading emotional? Many times we can see that it is a strong emotional atmosphere that dominates our transactions. After we read "Financial Psychology" by Norway's Tweed, we will deeply feel that transactions are influenced by emotions.

In many cases, it is not technical analysis, not fundamental analysis, nor daily life logic and mature trading strategies, but the impulsiveness and recklessness of trading emotions. Impulsiveness and recklessness are false courage, and it disappears after placing an order. and disappeared without a trace. This whim of courage seems to be given by analytical methods such as technical analysis, but it will make you down after a long time.

Most trading behaviors are facilitated or assisted by emotions. Opening a position is accomplished overnight on impulse; when holding a position, emotions seem to have gradually subsided, and feelings of disappointment and regret arise spontaneously; when closing a position, there is even infinite nostalgia and loss remorse.

In the process of trading, what most people trade seems to be not money, but a simple, eager inner anxiety, but the real loss is money. There are all sorts of shallow, crude emotions involved in the trading process: impulsiveness, regret, arrogance, impatience, greed, fear.

When using technical analysis to study and judge the market, when the K-line combination shows an upward pattern, the indicators show a golden cross, and the moving average is also boosting, traders take it for granted that a good trading opportunity has arrived, and it is time for me to make a lot of money. There is also an "emotional golden cross" among those who are heart-beating and impulsive in trading. They don't care about how the market will develop in the next step. Delivered to a market that is as choppy and extremely dangerous as the sea.

Traders often lose out to six destructive emotions: impulsiveness, impatience, arrogance, regret, greed, and fear. These six emotions are like six kinds of harmful gases and liquids. Your brain and other organs of the body are containers filled with these harmful gases and liquids. If you are not careful, they will come uninvited anytime and anywhere. Run out to harm and erode your business.

What traders need to understand is not the so-called technical analysis, but what they should understand is prudence, patience, humility, relief, restraint, and moderate worry. The prerequisite for an ordinary trader to control the risk is to control his emotions, and the prerequisite for cutting losses is also to control his emotions; it is often not the market that defeats you, but your ups and downs and abnormal restlessness.