Trading Psychology Quiz 11

You find yourself rushing to enter trades immediately after a loss, hoping to recover quickly. What is the best approach to handle this situation?

• Take larger trades to recover the loss faster.

• Pause trading, reflect on the loss, and ensure your next trade follows your strategy.

• Watch other traders to see what trades they are taking.

• Avoid reviewing the loss to prevent emotional reactions.

You have had a week of consistent wins and feel invincible. How should you respond to avoid overconfidence?

• Increase the risk of your next trade to capitalise on momentum.

• Diversify into new markets to extend your profits.

• Review your trading plan and remind yourself to stay process-focused rather than result-focused.

• Take a break from trading to 'lock in' your wins for the week.

Which cognitive bias causes traders to seek out information that confirms their existing beliefs?

• Anchoring bias

• Overconfidence bias

• Confirmation bias

• Recency bias

What's the most effective way to track your emotional triggers in trading?

• Ignore emotions and focus purely on technical analysis.

• Use a trading journal to record emotional responses to wins, losses, and key decisions.

• Track your emotions by talking to other traders about your sessions.

• Analyse market conditions daily to spot patterns that affect your emotions.

You're tracking the performance of a new strategy but keep adjusting it after every trade. What should you do to accurately assess its effectiveness?

• Test the strategy for a set period before making adjustments, and document your results.

• Keep making small adjustments until the strategy becomes profitable.

• Follow the strategies of other traders instead.

• Avoid using any new strategies and stick with what you know.

The market is volatile after a major news event, and you feel compelled to 'jump in' on the action. What should you do?

• Take quick trades to capture some of the market's rapid movement.

• Use higher leverage to maximise potential gains.

• Follow social media updates to see what other traders are doing.

• Stick to your predefined strategy and avoid emotional decision-making.

You feel stressed and fatigued halfway through your trading session. What's the healthiest response?

• Take a break, re-centre yourself, and return once you feel more focused.

• Push through and keep trading to maintain consistency.

• Reduce your position sizes but continue trading.

• Trade in shorter timeframes to complete your trades more quickly.

What is the most effective way to manage trading performance anxiety?

• Practice relaxation techniques, like breathing exercises, and stick to your pre-planned strategy.

• Avoid trading entirely on days when anxiety is high.

• Trade as frequently as possible to build mental toughness.

• Focus on outcome-based goals instead of process-based goals.

What mindset shift is essential to reduce impulsive trading?

• Assume that every trade is a 'must-win' situation.

• Increase the speed of decision-making to stay ahead of the market.

• Adopt a process-driven approach where success is based on execution, not outcomes.

• Only trade during times of high market volatility to reduce waiting time.

You just experienced an unexpected profit boost from a trade you didn't plan properly. What should you do next?

• Increase the risk of future trades since you're now 'trading with house money.'

• Log the result in your journal, review how it happened, and avoid forming bad habits from accidental wins.

• Use the profit to increase your position sizes for future trades.

• Ignore the profit and continue trading as usual.