Nicolas

Chief Client Relationships Officer Responsible for the relationship with all our organization’s customers. I oversee the Customer Support and Customer Relationship Departments.

Greed. Envy. Gluttony. Sloth. Wrath. Lust. Pride… the seven deadly sins. According to ethics, these are the transgressions standing in the way of spiritual progress and purity. In reality though the seven deadly sins represent the dangers of both excess and defect which in modern times can be applied to virtually every aspect of life.

These cardinal vices often play out in the financial markets, leading traders to spiritual ruin or even bankruptcy. For this reason, it’s important to understand how these sins impact our trading behavior. It’s even more critical to identify the root causes of these transgressions so that we can replace them with virtues.

In this series, we take a look at the seven deadly sins of financial trading and how you can overcome them to improve your trading mindset.
Pride is the feeling of satisfaction from one’s achievements… great right? Well yes, it is but if you’re not careful, pride can lead to overconfidence and overconfident traders rarely make it because the mighty markets always find a way to humble them. Unfortunately, arrogant traders who let pride go to their head rarely concede defeat which is a recipe for disaster.
One common feature of world-class traders is humility. Humility is both poetic and practical. After all, we’ve all heard of the phrase Be Humble or Be Humbled. Nowhere is this truer than in the money markets.

Proud traders run into many problems. For starters, their inflated sense of self worth prevents them from admitting they’re wrong. A trader who is always right rarely exits their trade. “But I’m right,” they think; “the market will turn around,” they say. Before they know it, they’ve margined out. Rather than admit defeat, they’ll blame some external factor for their loss and start the process all over again. No matter how deep your pockets, you can’t keep up with this strategy (which is really not a strategy at all).

It doesn’t matter how right you think you are – the market is the boss. You are just a humble trader looking for a piece of the action. You certainly aren’t insignificant, but you’re not going to beat the market every time, either. You are an active participant looking to make sense of the big picture. In other words, you are like the millions of other market gladiators out there… you might be better than some and not as good as others, but in the end you are just one participant. If that doesn’t humble you, nothing else will!

Learning to be humble doesn’t have to be difficult. After all, it doesn’t call on you to abandon your sense of self-worth. Humble people learn to be flexible without being fickle. If you lose a trade, it doesn’t mean your trading system is bad it just means you were on the wrong side of that particular trade. But if you’re on the wrong side of a trade over and over again, perhaps it’s time to refine your strategy. Humble people realize this, whereas those stricken with intense pride and ego do not.
It’s important to stick to your guns, both in finance and in life but it’s equally as important to be flexible because your ability to adapt to your surroundings and the prevailing market condition can help determine your staying power in a market that has a very high turnover.

Supposing you’ve enjoyed great success in the markets, is it really beneficial to gloat on your glory days or gaze at the payouts from past wins on your bank statement? Making good trades in the past is no guarantee of future success.
Believe it or not, the deadly sin of pride could actually lead to sloth if you believe you’re too good to waste your time on things like technical and fundamental analysis, stop-loss or risk management. If trading on a whim isn’t laziness personified, we don’t know what is. Overconfidence is a slippery slope that leads to many perils.

So endeavor to become a humble trader. It certainly isn’t hard if you realize you occupy a very small space in the broader market. If you’ve had success, great! Keep going but find new ways of achieving growth and don’t let the glory go to your head or else you may experience some market karma.

TAKEAWAYS

  1. Don’t brag about your wins
  2. Remember that the market is the boss not you
  3. Look for new ways to grow and diversify

Are you a proud trader? Tweet us @easymarkets and let us know, alternatively contact our support team for assistance.

Source Sam Bourgi- Financial Markets Writer

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