THE NAKED TRADER

THE FOUR
EMOTIONS
THAT ARE
KILLING YOUR
FOREX TRADING
AND WHAT TO DO ABOUT IT

Prepared by:
DARREN CHRISTENSEN
& NICHOLAS CUMMINS
 THE NAKED TRADER

INTRODUCTION
An Overview Summary

You’ve probably heard of the “Four Horsemen of the Apocalypse”, while I’m not going
to give you a “sermon” today, I am going to talk to you about the “Four Horsemen” of
your trading account “apocalypse” and how to defeat them.

They are the four emotions that influence most trader’s decision making
in any market: Greed, Fear, Hope and Regret, and if you don’t thoroughly understand
them and keep them under control, they will KILL your trading account, in shall we
say an “apocalyptic” manner…

Let’s take a closer look at the “Four Horsemen” of your trading account’s
“apocalypse” and how they work to influence your decisions in the market and how
to control them instead of being controlled by them…

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 THE NAKED TRADER

GREED
Greed is something we are all familiar with; it is the excessive desire for money and
wealth (or other things). However, as it relates to trading, it can be more specifically
defined as expecting an unrealistically large or quick profit from a trade.

Risking more than you know you should on a trade is perhaps the most obvious way
that greed negatively affects traders. You need to define the 1R Dollar Risk per
trade that you are comfortable with potentially losing on any given trade, and never
exceed that amount. If you start ratcheting up the amount you’re risking, you are
being greedy, and it only takes one losing trade that you’ve risked too much on to do
serious damage to your trading account.

When traders get greedy, they may not

even be aware of it. It often manifests as
looking at your open profit on a trade and
thinking about how much you’ve made and
about how much more you ‘could’ make by
keeping the trade open.

Here’s the danger with this line of

thinking: Open profit is just that, “open”,
and you have not secured any profit from
a trade until the position is closed. Unless
you have closed a profitable position out,
you really have nothing but
the potential for profit.

Traders often confuse the feeling that

they get by looking at their open profit on
a trade as ‘real’ money that they already
have ‘in the bank’.

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THE NAKED TRADER

Ignoring the fact that open profit is much different than ‘secured’ profit is the root
cause of why traders do things like move their original profit target further away as
price approaches it, which typically results in a much smaller profit than their original
target would have brought them, or no profit at all. If you are greedy in trading, it has
the ironic effect of making profits harder to obtain.

If you had a predefined profit target set at a 1:2 or 1:3 risk reward ratio, but as price
gets close to that target you move it further away because you “think” price will keep
going for an even bigger gain…that is greed, and it will almost always result in you
making LESS than you would have if you just exited at your predetermined profit
target. It can be difficult to exit a trade when it “looks good” and is in your favour, but
most of the time, that is precisely when you should be exiting. Many traders hold
trades too long, move their targets further out or set unrealistically large profit
targets. All of these things are the result of GREED and they will all result in you
making less money than if you weren’t greedy.

Greed can help you amass money in some areas of life, like if you are a “cheap” person
who doesn’t like to spend much money…while this personality trait obviously has
other negative consequences, it will help you grow your bank account over time.
However, greed in the currency markets or in any investment / trading market will
work against you most of the time and it’s something you must consciously be aware
of and fight if you want to have a chance at long-lasting trading success.
THE NAKED TRADER

FEAR

Many traders struggle with fear at some point, and they also get abused by it. Let me
explain…

Fear can be both good and bad in trading, unlike greed which is essentially always
bad for a trader. Fear is an extremely powerful emotion, perhaps THE most powerful
of all emotions we experience. Fear of death and other consequences keeps us (most
of us) from doing stupid things like driving drunk or trying to wrestle
a crocodile. Fear is essentially a survival response, and this can be good if you were a
caveman trying to escape certain death from a saber-toothed tiger.

However, in modern day financial markets, fear can cause all kinds of problems for
traders…
THE NAKED TRADER

Fear can be both good and bad in trading, unlike greed which is essentially always bad
for a trader. Fear is an extremely powerful emotion, perhaps THE most powerful of all
emotions we experience. Fear of death and other consequences keeps us (most of us)
from doing stupid things like driving drunk or trying to wrestle a crocodile. Fear is
essentially a survival response, and this can be good if you were a caveman trying to
escape certain death from a saber-toothed tiger. However, in modern day financial
markets, fear can cause all kinds of problems for traders…

First off, fear of losing money can be both good and bad, you just need to find the
right balance and not have too much fear. Fear of blowing out your trading account
will cause you to place stop losses on all your trades, thus, in this regard fear is good
for the trader. But, fear can work against you too, by causing us to not enter a
good trade setup only because we are “afraid” of losing money, perhaps because
we’ve just had a series of losing trades. The other main reason traders become afraid
to trade is because they have been risking too much money per trade and have just
lost more than they can stomach.

Thus, there are two main points to be aware of that can help you curb the negative
effects of fear:

Greed is something we are all familiar with; it is the excessive desire for

1 money and wealth (or other things). However, as it relates to trading, it can
be more specifically defined as expecting an unrealistically large or quick
profit from a trade.

Risking more than you know you should on a trade is perhaps the most
obvious way that greed negatively affects traders. You need to define

2 the 1R Dollar Risk per trade that you are comfortable with potentially
losing on any given trade, and never exceed that amount. If you start
ratcheting up the amount you’re risking, you are being greedy, and it only
takes one losing trade that you’ve risked too much on to do serious damage
to your trading account.
THE NAKED TRADER

YOU have the power to control your own fear in the market. You should be a little bit
afraid, because you can lose all your money if you let the market take it. But, the great
part is that if you are aware of this and act accordingly, by properly managing your
money and sticking to your trading strategy, you can find the right amount of fear and
not let excessive fear derail your trading efforts.

Also, listening to news and economic reports (fundamental analysis) can induce fear
into traders’ minds. News can cause traders to rationalize why they should close a
trade or enter a trade, regardless of what the price action is saying. This is very
wrong. The price action is all that really matters, and anything that can affect a
market will be reflected in its price action, so following news reports and analyzing
them is really a waste of time that can easily cause you to become fearful for no
reason.
THE NAKED TRADER

HOPE
Hope is dangerous for traders. It can be hard to understand this one, because ‘hope’
is usually thought of as a very good thing, and it is in most instances, just not in
trading.

Hope is essentially the expectation that something will happen or a strong desire for
it to happen. When traders trade with “hope”, they often ‘hope themselves’ right of
making money. Hope can cause traders to move their stop losses further away or
delete them all together because they think the market will turn around in their
favour, allowing them to avoid the losing trade.

Hope works in tandem with greed when traders hope for an unrealistically large
profit and move profit targets further out. This typically ends up with the trader
taking a very small profit because they never take the profit when it’s at a decent
dollar amount in their favour, because they “hope” it will keep going and going.

Hoping that every trade you take will be a winner is foolish. When a trader “hopes”
for a winning trade they are also expecting a favorable outcome, and this sets them
up for whole host of emotional trading errors because when you expect something to
happen and it doesn’t, it typically makes you sad, angry or regretful. It is much better
to simply take a realistic view on every trade, and that means understanding that
whilst you might have an effective trading strategy, that does not mean every trade
will be a winner.

You will have a mixture of winners and losers, and hopefully, over time if you manage
your money properly and do not over-trade, you will see the “edge” that your trading
strategy gives you, pay off. Thus, it would make far more sense to “hope” for
a profitable trading year IF you follow your strategy and implement consistent
discipline in your money management, rather than “hoping” that every trade is a
winner, because then you are hoping for something that is not realistic.
THE NAKED TRADER

REGRET
Regret is the feeling that traders often feel after a losing trade or a missed trading
opportunity or perhaps after not making as much money as they hoped they would
on a trade…possibly due to greed and fear, as we discussed above. Regret can slowly
destroy your trading account……

Many traders focus too much on past trades and “what if” scenarios. Something that
you need to understand is that NO two moments in the market are exactly the same,
thus it’s mostly a waste of time to stew over lost trades or that you didn’t make as
much money as you could have. You can’t change what happened on your last trade,
all you can do is evaluate what happened and try to take a little something away from
it and move on.

It is far more important to be focused on the “now” of the market rather than the
past, because the market is constantly ebbing and flowing and it does not care how
much you made or lost on your last trade.

Regret also causes traders to “chase” trades by jumping in the market after a setup
has already triggered. This gives them a far worse risk reward potential on the trade
which makes it a lot harder to turn a profit on the trade, chasing trades is not how a
skilled and patient trader behaves. Instead of being regretful over missing a trade
setup, the professional trader will simply remain calm and observe the market, learn
a little something, and keep his or her hands in their pockets until the next trade
comes along.

Chasing trade setups is a VERY slippery slope to forgetting about your trading plan
and kicking off the process of trading randomly or gambling in the market.
THE NAKED TRADER

CONCLUSION: HOW TO DEFEAT THE

“FOUR DEADLY EMOTIONS”
Since we are human, we are all susceptible to the same types of emotional trading
mistakes,and the ones discussed here are the most common. To effectively battle
them, the first step is being aware of them and their implications, which you’ve
learned here today.

The next step is to catch yourself “in the moment” and consciously become aware
that you are being greedy, afraid, hopeful or regretful, and then quite frankly, kicking
the emotional enemy in the ass.

Tackling your emotional trading enemies takes effort and patience; there’s no ‘free
lunch’ in trading and being unaware of this fact is perhaps why a lot of people fail it.
If you make an effort to become more self-aware as you trade and gauge how you are
feeling and consciously try to control how those feelings affect you, you will be far
ahead of most traders. I cannot force you to do these things or pay attention to what

I’ve said here today, but I can promise you that if you work to fight these “Four
Horsemen” that are killing your trading, and combine that battle with effective
trading strategies you will put yourself on the road to a successful trading career.
THE NAKED TRADER

THE THREE MENTAL HACKS

THAT WILL TRANSFORM YOUR
TRADING
So, you want to be a successful trader who makes money consistently in the markets?
First, ask yourself this: Do you have a successful mind? You simply cannot achieve the
former without first developing the latter.

Before we go any further, I want you to know that this isn’t another boring article
about “trader psychology” or beating the dead-horse of “controlling your emotions in
the market”. We just covered the importance of those things.

This lesson is about real-world mental thought processes that professional traders use
to succeed not just in trading, but in life. I’m going to show you what pro traders think
and how they act that allows them to achieve massive success in the markets.

We are going to go over specific thought processes and mental routines that you need
to start practicing and mastering. I’m going to give you some exercises you can start
working on today, to get real results. The key for you is going to be, sticking to them,
religiously, day in and day out.

The primary divide between a newbie trader and a professional, is their trading
mentality. In fact, the difference between successful people and those still struggling
in any field or endeavor, is mentality.

To put it a bit more succinctly; if you want to fix your trading, you first need to fix your
mind.

Here’s how...
THE NAKED TRADER

STEP 1
Learn to completely detach yourself from live
trades
Perhaps the single most defining characteristic of a professional trader is the ability
to mentally detach from live trades. Beginning and losing traders are not yet able to
do this, hence they struggle.

Your goal is to literally feel nothing after you press that buy or sell button on a live
trade. Once you get to this point, you stand a much better chance at making money
in the markets because you will largely eliminate emotion-born trading mistakes.

ONCE A TRADE IS
LIVE, AVOID THE
CHARTS
Professional traders have learned that the
easiest way to detach mentally from a live
trade is to simply avoid the charts. After
you place the trade, simply walk away;
turn off your computer and leave it be
until tomorrow at least.

Starring at the charts won’t help; you

cannot control the market, you can only
control yourself. It’s critical you let the
trade play out without your involvement.
In order for your trading edge to work, it
needs to play out without you meddling
with it, over a large sample size of trades.
THE NAKED TRADER

SCREEN WATCHING WILL RUIN YOU,

SECOND GUESSING
Watching the charts as your trade is live, just for amusement, is stupid. If that sounds
harsh, it’s meant to be. There is no bigger trading mistake than watching live trades
tick by for no good reason. It’s like being on a diet and purposely driving yourself to
McDonald’s every day when you’re hungry and trying not to eat the food.

It’s. Not. Going. To. Work.

You don’t need to feel the ups and downs of the market with a live trade on. You don’t
need to and you shouldn’t want to. Save yourself the torture.

What happens when traders watch the screens all day with live trades? A number of
things, but most commonly it results in second-guessing. You will second-guess your
trade idea when price starts moving against you a little bit. You will second-guess
your profit target as price moves up then pulls back against you a little bit. There are
many other scenarios that result from watching charts too much. The bottom line is, if
you want to mentally detach, you have to physically detach from the charts.

Your goal, in order to mentally detach from live trades, is to set the trade up and
forget about it, just walk away.
THE NAKED TRADER

HOW TO DO IT
The way you solve any type of trading problem is by making a conscious effort to
change your trading routine and that will lead to new, positive trading habits.
As with anything, simply removing the problem (the charts) can be a massive part
of solving the problem. You have a problem with a person? Removing that person
from your life usually solves the problem. Don’t communicate with them anymore.
You have a problem over trading and making stupid trading mistakes? Remove
yourself from the charts when you have a live trade on.
Find a distraction, it can be an activity, a hobby, anything really. Just make it
something you do every time you have a live trade on, so that you are building it
into your trading routine to ultimately make it a habit.
Another way to mentally detach is to make sure you have no way to access the
charts during the day while you’re at work or school or wherever. Delete that
trading app from your phone.
Perhaps you could even have someone else manage the trade for you and you give
them instructions on what to do and what not to do. The bottom line is that you
need to have a plan for how you will purposely remove yourself from the charts
after putting a trade on so that you can learn to mentally detach and start trading
like a professional trader.
THE NAKED TRADER

STEP 2
Start thinking of trading as a mental ‘war’

Your competition in the market is fierce. You are competing against players who are
better capitalized, better educated and perhaps more intelligent than you.

However, you have one thing they may not; a sickening desire to be the best and to
play the game with more discipline than them, because that is how you will beat
them.

Imagine there’s a gun to your head as you’re trading and each click of the buy or sell
button is literally a life or death decision. Sounds extreme maybe, but that is how
serious you have to take this if you want to be in the top 10% of traders, you
certainly aren’t going to get there by taking it lightly.

The point here is that you are competing

against real people, it’s not just you and a
computer screen and the charts, not at all.

Trading should be thought of as the ultimate

mental sport, a true battle of wits, if you will.
You’re in the land of big boys, hedge fund
managers, time to get your ‘war paint’ on and
stop pretending this is some get rich quick
Hollywood movie.

The opponent is the enemy and you are here to

defeat them, you are literally trying to take
their money. If you don’t think like this, I
promise you won’t take it serious enough to
maintain the consistent discipline required to
win.
THE NAKED TRADER

DON’T COME UNPREPARED

Whatever you do, don’t show up to the battle unprepared. Many traders open their
charts after funding their live accounts and they are literally like a solider showing up
to fight a battle with a pocket knife.

If you don’t want to lose all your money in a week, you need to be 100% prepared for
the mental test that is waiting every time you open your laptop and click on that
trading platform icon.

Important note: Whilst we are aiming to be prepared and extremely self-confident in

our trading approach, we are not reckless or foolish. Being well prepared and
confident is very different from taking stupid risks and being overly aggressive in the
market. In fact, part of being prepared is understanding money management and
having everything planned out before you push the buy or sell button.

We are not gambling or playing around, this is serious and we are ready to take on the
competition in all areas: Mind, Method and Money management, the 3ms.
THE NAKED TRADER

HOW TO DO IT
To master anything in life, you must learn, practice, repeat. Trading is no different.
Except that in trading, there are many people online offering education and advice
who perhaps aren’t the best to learn from.
I am probably the most competitive person you will ever met when it comes to
trading, business and entrepreneurship. So, when it comes to conveying to you the
mindset you need to succeed in the market, I am the man you want. Here are some
tips on how to start viewing trading as a competition and how to prepare for it:
View each trade as a negotiation, a deal. It’s a contract of sorts, so take it seriously
and make sure you dot all the I’s and cross all the T’s. If you were sitting next to
someone in a room and either you lose money or they lose money, you would be
much more focused than you are just trading by yourself. Starting thinking of this
as a competition where other people are trying to take your money. Do this, and
you’ll naturally start focusing more on the important things like money
management and being consistent in all aspects of your trading approach.
Train and prepare. Does a boxer just show up to the boxing match without months
of preparation and training? No, of course not, and if he did, he would be
pummeled. You develop confidence through honing your skills and learning,
mastering your craft.
Stay motivated to stay on track. You have to work on this, at least initially.
Motivation isn’t something only “lucky people” have. It’s a lifestyle, a mindset that
you have to train yourself to achieve through reading and repetition of proper
actions.
Understand chart psychology what your opponent is doing and thinking. You can
do this by learning to interpret the price action bar by bar,by following the
footprint of money.
Get yourself psyched up when you open your charts. You can do this by
reading trading affirmations that you like. You can even use music or motivational
videos on YouTube for this. I use to listen to Highway to the Danger Zone in my
early days, every day before looking at the charts. I still do sometimes. It always
gets me psyched for the “danger zone” of the market.
Bottom line; trading the market is basically a mental war. Think of it as such and
treat is as such. If not, you will surely be defeated in battle.
THE NAKED TRADER

STEP 3
Don’t let money make you ‘funny’
Money screws with peoples’ minds. Whether you’re making it or losing it, there will
probably be some psychological side effects that come with it. Professional traders
know that to make money consistently they have to fix this problem. You want to fix
your trading? You have to fix your money mindset.

The primary mental hurdles that face traders in regards to their money, are the
following:

Fear of loss, fear of missing out. Fear of loss

causes traders to let small losses turn into big
ones, because they are simply afraid of taking
any loss. Fear of loss also can cause traders to
be afraid to trade, letting good trades pass
because they’re too afraid of a potential loss.
Fear of missing out generally means you are
chasing trades that you missed for one reason
or another. You get mad at yourself and you
start getting afraid of missing out on the
profits, so you jump in at a terrible entry point,
typically this results in a loss.
Risking too much per trade and all the
problems that come as a result. I’ve written
myriad articles on this.
Not knowing where to exit the market or how
to exit. Self-explanatory, see solution below.
Generally speaking, having no capital
preservation plan is the reason most traders
fail and it’s the reason they let the money
make them ‘funny’. Your money management
plan IS the most important part of your entire
trading approach, don’t think you can skip this
part.
THE NAKED TRADER

HOW TO DO IT
The only way to overcome money management problems is to predefine, preplan
and just be prepared for losing before you enter a trade. Remember, any trade can
lose, there’s a random distribution of wins and losses for any given trading edge.
So, go into every trade understanding and accepting that it could be a loss.
A capital management plan is the only way to train yourself out of any bad habits in
regards to risk management, risk reward and so on. Your capital preservation and
risk management approach are your life-line in the market, it’s your oxygen.
Without it, you will quickly suffocate.
You need an exit plan for stops and targets, etc. Don’t just ‘wing it’ on every trade.
Plan out where you will exit for a target and a stop loss BEFORE you push the buy
or sell button.
No matter how small your account is, treat it with the same respect and approach
you would if it was a $1 million account or even $1 billion. Same principles apply.
Electronic digits on a computer screen can seem fake, cold, not real. To counter
this, get some monopoly money or casino chips and get two jars. Each time you win
put some in the winning jar, each time you lose put some in the losing jar. It will
make the money seem more real to you as you touch it. I even suggest withdrawing
profits from your account regularly and taking them out of your bank and touching
the actual money.
Can you sleep at night with the money you have at risk? Ask yourself, how do I feel
going to bed, can I live with this amount? If you can’t fall asleep because you’re
thinking about the money you have at risk, it’s time to lower your risk amount.
You need to remain disciplined and consistent. If you stay disciplined with your
money management approach for a year and then you go full-tilt and gamble it all
on one trade like an idiot, not only will you risk losing all that money, but all the
work you spent staying disciplined will be for nothing. You owe it to yourself to
stay CONSISTENTLY DISCIPLINED. It’s the only way to make money OVER TIME.
Never deviate.
Make this stuff into mantras that you repeat to yourself daily. Believe in it, own it
like a seasoned pro. Do this if you want to join the big boys.
 THE NAKED TRADER

CONCLUSION
The core foundation of all great business people including traders, investors, etc. is
their mindset. The foundation upon which their success is built, is the ability to
handle pressure and temptation whilst remaining consistently disciplined.

The ability to stick to a plan and remain almost emotionless whilst carrying out their
chosen profession, be it trading, managing a company or even being an entrepreneur,
is what puts someone in the top 10% of their field.

I am a living, breathing testament to what we discussed in today’s lesson. I do more

than just help traders with entry strategies and price action techniques in
my courses,because there are other things in trading that are just as important, if not
more.

This is the main reason that I combine my price action analysis trading strategy with
a solid mental and capital management plan to help traders achieve long-term
success. It’s my hope that with ongoing study, you can master these disciplines to
improve your trading, state of mind and ultimately, grow your trading account.

If you want to join my telegram channel to see my analysis and my trading tips , you can join it by clicking on this link :

https://t.me/priceactionacademy1