In trading, you may often find yourself in a situation where you go along with the herd, only to realize it wasn’t the wisest decision. 

This frequently occurs because you are not confident in your choices. 

How to prevent it? The answer points towards your own convictions.


Crowd influence

In the psychological research done on the topic of crowd influence on individual decision making, it has been found that one of the most important factors is the strength of conviction. 

Let’s call the person with strong, firm confidence A. 

According to the research, A would make the same decision regardless of the nudge in the opposite direction. 

Assume, however, that person B has no strong feelings or preferences. This may be because B is indifferent, hasn’t investigated the choices and doesn't care enough about the result, or has made a research but is confused and still cannot make a final decision. In both cases, a nudge from the crowd can influence B.


Loss of confidence

How to know if you ‘lost your confidence’? 

One way to look at it is through the concepts of control and manipulation. As soon as you are looking to control the market to go your way, it means you cannot afford to lose. Furthermore, the inability to fail means that you only feel good when you are sure you will win, which means an absence of confidence. 

Note that this scenario is different from your strategy, or intuition, telling you to exit a trade. There is no need to control or manipulate the market. You are confident in your decisions, and sometimes these decisions mean losing a battle, or a trade, in order to win a war or at least earn a living for this month.


“Control and manipulation are the first signs of a lack of confidence.”


Since both person A and person B may be the same person, we can observe cases in which person A may lose their certainty:

1. Due to A's desire to be liked. If A sees many other people making a choice contrary to theirs, they may want to fit in. This depends on the level of independent thinking since it has been shown that people from different countries may choose differently based on their culture.

2. Due to A's desire to be correct. If A wants to be right and there is proof of previous data where people made a choice contrary to theirs that was deemed "right," they may be tempted to change their minds.

3. When A's perception is distorted. This is possible if the options appear to be the same, which causes person A to become confused. As a result, A may feel compelled to be correct and decide based on their influence.


Trading and confidence

Now, you may be thinking, "I don't care about being right or liked. I want to make money. " 

Although you may find this to be true, you are still working with money, and you may realize that you are not entirely indifferent to your results. 

It is the difference between succeeding and failing. Asking for support from your family as you lose all you have or becoming a millionaire? Looking for a new job or a new Lamborghini? You get the picture. In this case the emotions are involved.

If the person is only marginally interested in the outcome of their choice, the need to be liked or right is not as much of an influence. However, since there is little to no indifference in trading, especially if you are dealing with your own money or the outcome decides your livelihood, your choices in trading play a much more significant role than you think. 

It may already be clear why the previous factors may make you lose confidence. For example, you want to be right to not make the wrong choice, and the experts around you may influence that choice. But, what about being liked? 


“The first step in the trading journey is gathering knowledge and skills that come from experience. However, success is always based on trust in your own ingrained wisdom."


Both wanting to be liked and wanting to be correct are mindsets. You may consciously not care if everyone hates you (after becoming a millionaire), but subconsciously you may still care. Our brains are wired to stay in groups and fit in since that helped us survive in dark past times. This means, in the worst-case scenario of losing the money, you may care even more since you may be reliving these dark past times in your own right.




Conclusion and final thoughts

Having confidence in your choices determines how much others can influence them. The influence from the outside can lower that confidence if we are not indifferent to our choices. In this case, the pressure to be right or liked can play a role. 

Now, you may say, "but if I cannot be indifferent, is being influenced such a bad thing?" 

Well, yes and no. ;-)

Yes, because you can be equally negatively and positively influenced, and in general, there is a lot of negative influence. By "negative influence," I mean the biased influence that favors someone elses' profit over yours.

And no, since if you are aware of it, you can learn to depend on your own choices. This notion can be scary, but I believe it to be the only way to become a profitable trader. It would help if you learned to trust yourself over anything else. This is not to say that you don't require proper education and guidance from those you see as positive influences. However, you are the one making your own choices in the end. 


To your trading success,