Impulsive trading is any trade outside your specific strategy. We all do it, even professional traders, although we like to recognize it as such and quickly exit or get in and manage accordingly. Some say impulsive trading is lack of discipline. Only partially correct, impulsive trading is more about the feelings behind the trade. Such behavior can range from severe impairment on one end to no impairment. Like addition disorders, there are varying degrees of impulsiveness. You may be prone to be more impulsive trading some times than at other times. If you’re not totally on your game, it’s easy to fall into a position ‘just because’.
Impulsiveness generally creates havoc to your bottom line. It is usually based on greed, following previous trades. If the trader just came off a losing position, they try to redeem themselves. If the previous trade was a winner, they are led to believe they are infallible or want to continue a winning streak. Eventually, the market turns and humbles the impulsive trader. Recognizing and wanting to change that behavior is a good start.
Some of my subscribers feel genuinely addicted to trading. They feel the nagging urge to always be in a position simply because the market is open. Impulsive trading rules their approach, which is why they find themselves seeking help. Not sure there is any formal process to curb this disorder but if it’s like many other ‘addictions’, group therapy may be the treatment. For that reason, I invite these traders into my Trading Room to help curb that urge. By continuing to follow a well defined structure, they will practise their patience and tone down that yearning. Eventually, that program does bleed off inflated egos and profits tend to accumulate.
There is clearly more to this topic than can be discussed in a mere blog. Just know that there is hope, and it starts with a clear vision of where you want to be and how to get there.
Head Trader Hugh W. Grossman