This article is about Einstellung effect on trader behavior in losing trade condition and suggestion to overcome its effects.

Monkey trap

Petr Karel Ontl describes in an article [1] how monkeys are often sold as pets in India, and describes how they are commonly trapped:

The trapper fastens a piece of cord to a tree-stump. To the other end, he attaches a pot with a narrow neck. Into this pot, he drops several nuts and scatters a few more on the ground nearby. He then waits out of sight. Soon a band of monkeys descends to feed. Before long, one of them discovers the contents of the pot. He puts his hand in easily enough, but, having grasped the enticing snack, he cannot pull his clenched fist out through the narrow opening no matter how hard he struggles. The monkey’s fate, for all his cleverness, is sealed. He becomes trapped.

We have three possible conditions whenever we enter the market.
  • Market move pip by pip as per over plan.
  • Market move as per over plan but bit a different way.
  • Market move opposite direction .

The first conduction is not possible simply because there is always change market action, though market can move in the same direction but the path of that direction will be different.
So we have two conditions left.
  1. Market move in our direction with a bit different way
  2. Opposite direction move.
The Same direction means winning, it is ok, that is what we want. Opposite direction means loss, nobody wants to lose. So if we are on another side of the market that is losing side, then we have to start rescuing process. Now we come to this point “market move against our entry direction and we have to do some actions”

What we do in that condition

  • do nothing
  • close trade
  • Double up the trade.
  • Start praying.
  • revenge trade .
  • Add more funds.

The point is not what we do. But the point is what we do is “doing the same thing again and aging”. The cycle is running in this way every time.Most of us did not take any action. In front of our own eye, the position goes deep under water and we do nothing but to just looking at the screen.

the photo is here [2]

When position finally closed either by margin call, the market closed or by our self in the deep loss, we wonder why we did not act/react at the right movement. How many times I have fallen in this trap, who knows.

the photo is here [3]

This happens most of us, ever wonder why we do not pull the trigger at the right time It is not our fault it is in our nature. Yes, there is phenomena called The “Einstellung effect”

The Einstellung effect

In an article[4] publish at the Einstellung effect define as.The Einstellung effect occurs when a person is presented with a problem or situation that is similar to problems they have worked through in the past. If the solution (or appropriate behavior) to the problem/situation has been the same in each past experience, the person will likely provide that same response, without giving the problem too much thought, even though a more appropriate response might be available

Merim Bilalić & Peter McLeod explain theEinstellung effect in an article [5]The Einstellung effect is the brain's tendency to stick with the most familiar solution to a problem and stubbornly ignore alternatives

They also wrote thatPsychologists have known about this mental phenomenon since the 1940s, but only now do they have a solid understanding of how it happens.

so what to do

  • Keep your mind open
  • Bee opens for new ideas
  • New solutions
  • New quick fixes
did you remember? "the drowning man story" [6]don't wait too long.

Take the first available chance to safety.

Whenever you catch saturation like water is rising don’t Waite for too long time just take the first available chance to safety with no or minimal damage, commonly known as cut your loss short. The market often gives a one or two chance to get rid of bad salutation. At this very time, we have to take control of our self to break the shekels of the Einstellung effect . the market is a live beast that learns and adapts to trader behaviors, don’t forget that the market is the sum total of the behavior of the participants engaged in the market.Try not to become a victim as a sitting duck by doing nothing instead continually monitor the market movement and adjust yourself accordingly.


The Trader is always at the mercy of market behavior, market condition constantly changes. When market move against the trade position mostly trade did not react in a proper and timely Mainer and repeat the same action again and aging due to “Einstellung effect” which causes the repetition of same behavior Trader must react according to every action of the market til goal is achieved.

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