The Trader's desk - Complacency

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Every losing trade begins long before the stop loss is hit. It begins with an emotional shift—from confidence to complacency, from hope to disbelief. Recognising this cycle is the first step towards breaking it.

Trader's desk - pitfalls

The most discussed trading pitfalls are overtrading and revenge trading. Lack of discipline in position sizing, abandoning a strategy, and failing to follow a defined process are equally common.


During my trading journey, however, one pitfall I encountered repeatedly was complacency.

Complacency isnt caused by successful trades. Complacency sets in when we relax risk management.

Allow me to elaborate.

Success


Picture having a string of successful trades and/or trading days. Some scalps, some swings...overall successful. Profits are up, cash is positive and overall confidence is high. 

Confidence


Another trade is placed, fuelled by a growing belief that the market will behave exactly as expected. The stoploss is:
  • either widened
  • or not placed (naked position)
Trader may also choose to increase position size or extend stop loss during the trade.

After moving sideways, there is a spurt and our position is in profit. expecting our target will be achieved, the market makes a sudden downturn. Our position is now in the red but we expect a rebound. 

Hope 

Hope drives our decision more than confidence.

There is a rebound validating our analysis, but our position is still in the red (just a tiny bit)

As our positions swings so does hope swing back to confidence. We now expect a full run till our target, but, the rebound was a dead cat bounce. 

Disbelief 

The downturn comes quickly and our stop loss is hit. Caught unawares, total disbelief. How did we get this trade wrong? The correct indicators were used, they worked before, how did it go wrong this time?

Revenge


We dont recognize it, but the ground is prepared for revenge. The market owes us and we need to prove we are right. The revenge trade actually begins before the next order is placed.

This is the point where most traders make their biggest mistake—not because they lack knowledge, but because they want to prove the market wrong. That's where revenge trading begins, and that's what we'll explore in the next edition of Trader's Desk.



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