Highlights: ①. Gate Intermediate Futures Courses are designed to elevate traders to professional status by developing a robust futures trading system. These courses aim to enhance traders' skills comprehensively, covering investment philosophy, futures trading tools, and trading systems. ②. This issue will explore the phenomenon of FOMO, delve into the underlying logic behind it, and explain how to effectively manage emotions in the context of futures trading.
1. Emotional Phenomena in Futures Trading In futures trading, have you encountered the following situations? ①. Getting caught up in high-frequency manual trading and finding it hard to stop.
②. As your investment capital increases, so does your psychological pressure, leading to frequent and sometimes uncontrollable trading. This requires constant monitoring of the market and often results in emotional trading, which ultimately leads to losses.
③. Frequently chasing high prices during market rallies due to the fear of missing out, which leads to trading losses. Why do these phenomena occur, and how can they be overcome? To explain these phenomena, we need to delve into the deeper psychological reasons behind them. Understanding the underlying logic requires us to first learn about the concept of the "random reinforcement trap."
2. What is the Random Reinforcement Trap? The random reinforcement trap refers to the phenomenon where random rewards lead to addictive behavior. To understand random reinforcement, we need to discuss the Skinner box. The Skinner box is a psychological experimental device invented by behaviorist B.F. Skinner in 1938. It was used to conduct experiments with lab rats.
The basic structure of the box is like that: one side of the box has a lever that can be pressed. Next to the lever is a small box where food pellets are dispensed through a small hole connected to an external food dispenser. When the animal presses the lever, a food pellet drops into the small box, and the animal can eat it.
In multiple experiments, one group exhibited addiction to random reinforcement. When the rats pressed the lever, food was not dispensed consistently. Sometimes pressing the lever would release food, and other times it would not. The timing and quantity of food release were random and irregular. As a result, the rats, stimulated by the random food rewards, would press the lever frantically for hours until they were exhausted.
This experiment explains the addictive nature of behaviors such as gambling, short-term trading, and blind box purchases. The randomness of rewards can lead to compulsive behavior. Understanding the underlying principles helps in recognizing the problem and overcoming psychological weaknesses, preventing oneself from falling into the same trap as the lab rats.
3. What is FOMO? FOMO (Fear of Missing Out) is the fear of missing out on potential opportunities or gains. It involves the desire to have more, the fear of missing out, the tendency to compare oneself with others, the influence of the group, and the expectation of winning. These factors are almost universally present and have a profound impact on most investors and markets. The result is the creation of frequent, widespread, and continuously repeated mistakes. —From Howard Marks' book "The Most Important Thing Illuminated"
4. How to Avoid FOMO and the Random Reinforcement Trap in Futures Trading? ①. Develop a Trading Plan: Follow your trading plan without deviating from it. Ensure that every trade is supported by logic and strategy.
②. Maintain a Good Trading Psychology: Control your trading emotions and manage the fear of missing out on potential opportunities.
③. Practice Risk Management: Trade moderately and manage your positions effectively. Set take-profit and stop-loss levels to make your trades more strategic and logical.
④. Establish a Trading System and Align Actions with Knowledge Keep a learning mindset and continuously improve your trading logic through education and practical experience. Build a trading system and continually refine it through real-world trading.
5. Summary
Emotions and mindset are critical to trading success, particularly in high-leverage and and heavily invested futures trading. In addition to having the correct investment philosophy, efficient tools, and a validated trading system, continuously training one's mindset through practical experience is a mandatory course for excellent traders.
For practical trading operations, visit the Gate Futures platform. Register for a Gate account now and begin your futures trading journey!
Disclaimer This article is for informational purposes only and does not constitute investment advice. Gate is not responsible for any investment decisions you make. Content related to technical analysis, market assessments, trading skills, and traders' insights should not be considered a basis for investment. Investing carries potential risks and uncertainties. This article offers no guarantees or assurances of returns on any type of investment.
