What is the trap of mental breakdown lurking inside the chart? Are you prioritizing the important factors when predicting price movements?

Tengen Mental Management.10

Mental collapse.
This is something that must be avoided.
The mind inevitably has ups and downs.
Because taking profits and then cutting losses brings joy or sadness and frustration.
So in what situation does one reach the realm of 'mental collapse'?

It is when confidence is lost.

Losing confidence…?
First, as individual traders, do we trade daily with full confidence?
Even though I am a full-time trader, I don’t trade with full confidence.
So let’s break down this confidence.
What are we confident about?
① Trading method
→ This is dangerous. There is no Holy Grail.
② Market context
→ Analysis is just analysis and should not narrow down price movement expectations to a single direction. It is only a guide. It is dangerous to declare up or down with certainty.
However, it is important to have confidence in your own market context. Be careful not to fall into certainty or to become locked into one single view.
③ Information
→ There are talks in communities, information from SNS, etc. Such information is just information and does not build confidence. Believing or not believing is up to you, and trading entries based on information with confidence is dangerous.
④ Capital management
→ The market easily surpasses what we individual traders assume.
If you have millions and trade with about 0.1 lot, that’s different. But when starting from a small capital and aiming to grow, you should not be overconfident or complacent.
That is the iron law of capital management.
Putting emotion into money leads to mental collapse, so it is dangerous.
⑤ Indicators
→ I think this is what you should not have the most confidence in.
Most likely the people who create indicators aren’t thinking, 'If you use this indicator you’ll be on the road to victory!'
Indicators are just 'guides for price movement' and a supplement to analysis.
Like 'MA should have been this' or 'pivot didn’t work'…
This is dangerous.
Setting indicators on a chart gives a sense of satisfaction and a feeling that you can react from anywhere. This can lead to confidence or overconfidence. Dangerous.

In this way, before confidence is lost, we should consider what we are confident about in our daily trading.
Where is the confidence coming from?
Method? Capital management? The path we’ve won with?
Whether we win or lose, we can be confident in not losing money and in growing it; it’s okay to be confident in the market view that results from analysis and market context.
When entering with confidence, if you enter merely because you touched MA without proper environment recognition, is that a confidently entered trade?
If such a trade led to a total loss and mental collapse, you’d think, “Well, it was just gambling.”
Especially overreliance on indicators leads to mental collapse.
If you end up clinging to your entry with confidence and it keeps pushing and then a big drop comes, you may have your entry basis overturned and feel denied by the market, leading to loss of confidence and loneliness.

Returning to the opening discussion.
Are you trading with full confidence?
A good risk-reward entry point with losses within tolerance.
Price movement or price action is as expected!
Currency strength is favorable, and on top of that, indicators are indicating in the same direction.
This is something you can currently keep a position with confidence!
I think this is normal.
After testing and entering with your iron-clad pattern, if you anticipate a reverse scenario and your stop is within expectations, you can trade with confidence, right?
There are many words here, but if you feel any mismatch, discrepancy, misunderstanding, or overconfidence, it can easily lead to mental collapse.

So, as mental management, how should we proceed?
Draw a line between what is okay to be confident about and what would lead to overconfidence.
Set priorities for indicators, market context, and analysis.
For example, if I rank indicators in my trading as…
S rank: monthly and weekly pivots
A rank: daily pivots, 25-day moving average
B rank: Ichimoku Kinko Hyo, midpoints of each timeframe
C rank: RSI
Even if you set the above ranks, if some lines on the weekly pivot and daily pivot coincide, your basis increases.
If everything moves against you, there will be a movement that denies the priority ranking—an act that indicators cannot supplement.
Avoid overreliance on indicators and mental collapse; use indicators to help you analyze price movement and form market context, not to predict everything.
Even if you decide on indicator priority, you also need to decide the priority of price movement forecasting.
For example…
Priority of price movement judgment
S rank: Dow Theory
A rank: Candlesticks, support/resistance, trendlines, channels
B rank: Price action, Fibonacci, various indicators
C rank: Elliott Wave
I’m studying Elliott Wave, so if included it would be C rank.
What to prioritize varies by trading style and individual.
In managing the mind, it’s important to thoroughly examine what caused the collapse.
I used to rely on indicators, overtrade, and blow up; removing reliance on indicators and simply analyzing price movement honestly became a turning point in my trading.
We do not analyze indicators; we use indicators to analyze price movement and form market context.
By recognizing the environment, if results are poor, we improve the analysis; improving accuracy means revisiting the priority ranks above.
Does your trading style and method align with your priority ranks?
Even if you do everything possible and money still dries up, that will cause mental collapse and exit.
There is still more to do, and daily study is like seeking the strongest version of yourself. For now, be careful of overtrading position sizes and solidify your method while managing your mind.