Trading psychology is not new for traders. We could always learn technical analysis or market knowledge by reading and practicing. But most traders still couldn’t profit constantly when they have enough trading knowledge. Why do so many traders fail to make money? Only 10% of them are making a profit. One reason for this data would be highly related to trading psychology: Most traders are bad at dealing with their emotions or to say, weaknesses of humanity. To be a professional trader, apart from some hard skills to learn, it’s necessary to be an expert on trading psychology as well. Often on this psychological journey of a trader, every successful one has a 3-stage experience: See it, face it, sort it. See and understand the overall trading psychology is only the first step to furthering a trading career. To face it objectively is the second more important stage. And there will be nowhere to go till one trader has a final methodology to sort it.
The Psychological Journey
4 Psychological Trading FactorsI found out through my own journey that one of the main reasons to destroy a trading career is the time factor. People just seem to be in a hurry to make big money, especially in the FX industry when free deposits and high leverage are advertised everywhere. And once traders start to make a bit of profit, they go into a frenzy to make more. They want to believe that they will become millionaires overnight.
This is “greed” and believe me, despite what Gordon Gekko said, greed is NOT good for a trader.And when these same people are not making any money, or worse, when they are losing some of their precious capital, they suddenly panic and start doing all sorts of silly things, such as trading bigger size lots, moving stop losses or targets, or not having a stop loss or target in place at all. Sometimes they are even scared to take another trade. Fear follows up closely after greed, and fear is not good for a trader either. The other two trading psychological factors in a trading career to be avoided at all costs are overconfidence and hope. Wishful thinking. Everybody hopes their trades will go the right way. However, depending too much on a fingers-crossed approach is not sensible and can only end in tears. I was once sitting next to a trader who suddenly started to pray. Eyes shut. Hands in prayer position. I am not joking. I couldn’t believe it. This is NOT the way to make money…
Trading Base DecisionsAs a professional trader, you will never base your trading decisions on wishful thinking. If you do so, you will only blow out several trading accounts. And as a professional trader, you don’t want to get “a margin call”. Greed, fear, overconfidence, and hope can make your trading a total disaster. However, they are the psychological journey that every trader has tasted, and will constantly have to deal with throughout their whole trading career. You will need to avoid all four to be a successful trader.
Read More: How to build your successful trading plan
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