Introduction to Trading Psychology


Let me start off by saying that you even reading this chapter is a vital step in your trading journey.

Good job!

psychology

Now, as you already know, it takes more than two or three skills to make it in the financial markets.

These include the ability to evaluate the fundamentals, using different technical indicators, calculating your risks, determining the trend, spotting the right patterns…

I could go on and on for hours.

The point is that these technical skills are not going to be of any use if you don’t know how to deal with your emotions when you’re trading.

You could have the best strategy, use the best analysis, confirm the trend a hundred times and yet still lose.

And what emotion comes then? Anger? Fear? Greed? All of them at once?

Probably.

There are so many traders out there who are extremely intelligent, but keep losing money in the markets because they let their emotions cloud their decision-making ability.

And that’s what this level is all about.

Learning to achieve the right mindset and take control of your emotions.

Trading on an emotion. It’s a thing.

It is crucial for traders to learn how to control their emotions.

Notice how I said control? That’s because controlling your emotions doesn’t mean avoiding them.

There’s a big difference.

The truth is, you as a trader will always experience strong feelings when making or losing money, and that’s okay.

You are not a robot.

Us humans are emotional beings, and we can’t just forget that when trading.

The concept of being emotionless came from forex traders who believed that they could be robot-like when trading; not having to think or feel anything.

Well, I say, it is only possible if you stop being human altogether!

However, what you can do is to make a choice on how much you let our emotions affect your trading decisions.

And this is what we will discuss and practice in this level.

The skill of managing your own emotions. A huge part of Forex Trading Psychology.

What is Trading Psychology?

Trading psychology discusses the significance of traders mindset and how to manage emotions, feelings, thought processes, and decisions when trading.

According to the trading psychologists, forex traders have a better chance to succeed in the financial markets if they stay rational and not yield to greed or fear. They believe that even though psychological stimuli are different for each trader, there are still a number of universal influences.

These include fear, anger, impatience and greed.

There’s no doubt that the world of forex trading psychology is much more complex that that but we will keep it sweet and short for now.

Achieving the Forex Zen

Let’s talk facts.

There are risks involved in any and every job; whether you are an attorney, pigeon trainer, waterslide tester, or a Forex trader.

It’s simply a part of a it.

And whilst the risks differ for each of these jobs, their goal is the same.

To make money.

Now, let’s say you lost a trade even though you followed your strategy and all your rules. You made sure the price was trading under the major support level or above the major resistance level, and you followed everything on your checklist. You triple checked all of this and yet you still lost your trade.

Well, guess what.

That’s not a loss.

That’s what we call a business expense.

It is something we are required to pay for being able to trade the market.

trading psychology

I know what you’re thinking.

What would be considered a real loss then?

A real loss would be not following your set rules, ignoring your strategy, and trading based on someone else’s tips.

Simple as that.

Once you understand that winning and losing are two sides of the same coin, only then you will be able to measure your success – not in money but rather in consistency and self-discipline.

Remember, you can never be a loser if you always follow your rules.

Learn more about how you can manage and control these emotions when trading in the next chapter.