Psychological mechanisms of manipulation: freezing and escalation of commitment effects in Forex Part 2

This is the Part 2 of the post about Psychological mechanisms of manipulation: freezing and escalation of commitment effects in Forex.

This article is to explain a patter closely related with the trader's psychology.

Take care with your commitments. The commitment to be a trader is a dagerous one. That commitment may lead you to some very dark places. 

Honestly I can say the commitment to be a professional Individual Forex Trader is the worse thing you can do.

Why?

Because you are not prepared or at leat 95 % of the people who make those commitments are not prepared to do it.

As it is explained in the article the commitment to be a professional Forex Trader kicks in psychological mechanisms of engagement. Those mechanisme of engagement lead to escalation of engagement.

So combine this with the 95 % of probability that you are not prepared and you would have a very big probability of terrible loss.

If a proportion of the engaged are particularly vulnarable, psychologically and financially the drama is nearby.

The story of Igor is a typical example of commitment and escalation of engagement.

Without understanding the process of commitment, freezing and escalation of engagement this would be just a story, that just happened to somebody. Why this story would happen to you? What are the odds of that to happen.

Thanks to the social psychology we know that the odds are big, and they are against you.

OK what happens.

1. Igor makes a commitment to be a professional trader.

2. When you make a commitment you are engaged by your commitment. That is the key. You need to understand that at all costs.

3. Igor makes a mistake. In fact I think that that was not really a mistake whatever he explains for me it was a Black Swan effect a rare event that occurs rarely but when it occurs it blows you. It would be a mistake if he was the only one concerned, but he was not. After the fact it is easy to tell well I did a mistake that would not happen again.

4. What happens here it is important. A freezing occurs, he just can't let it go. He chooses to loose everything (family life) but not to give up trading. A deep personal drama develops a suicide is close. What happens?

The cold facts are that some traders really commit a suicide. And some of the best ever Jesse Lauriston Livermore

When he shots himserlf he writes his last letter:

“My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”


5. Igor gets a better trader,  again in the game, but another rare event happens, and again he looses everything. You would say that he make a mistake, but on the other hand I will tell you that he would not make a single dollar in the market without taking the risks.

6. He is in a small appartment and starts to write on forum TSD. That is the result of the escalation of commitment and freezing, even if you know that you are wring there is no way back you are engaged in your commitment.

This part of the trading psychology is not wildly discussed. There are a lot of stories about that.