Psychology?

There is a psychology behind trading.  It is about the perceptions change that you go through once you are actively in the markets trading.  While you are trading on a demo account it seems easy, but once you start handling your first live trade, indecisiveness will close in.  Understanding the trading psychology and how you will have different responses in each situation will help you get on to trading with the right mindset. This is crucial if you are to protect your capital when risk management is needed.  

Trading Psychology.

Trading psychology is the predominant reason why traders lose.  It has been widely discussed in ebooks and workshops that it has been a convenient excuse for losing. 

What is trading psychology?

Trading psychology is an attitude or a reaction that a trader responds with based on existing personality traits.  These personality traits may not be even related to trading or to market, but they surface from trading. If for example, under stress you usually just rush ahead without weighing up all your options then that is what you will do when the trades get tight.

Your Personality and Emotions

Common emotions brought about by your personality traits are fear and greed.
Fear can have a big effect on trading opportunities. Trades may not be made because of fear or they may be closed prematurely before they reach or have a chance to profit.  Meanwhile, greed will cause you to make trades which are too risky or too large while trying to accumulate profits.


Other emotions you may have to check are failure and discipline.  Failure is perfectly normal but we should not let this get us down.  Failure is expected and should make us wiser the next time around. While, discipline is about sticking to your proven plans and never deviating from them.

Are you ready for battle?

The reason many traders lose it is because they are not psychologically prepared for the  battle of trade.  There are traders that are not prepared to accept financial risk for something of which they have no control over the outcome.
When inexperienced traders experience consecutive losses, methods becomes replaced with a feeling of despair.
Traders may have the feeling that it is impossible to do anything right, in this situation trading psychology is more crucial or critical that the trading method.


Trading is 90 percent psychology and 10 percent methodology. Even with a proven trading method, if the trader lacks control over their emotions, it will be difficult for them to implement their trading method.  

How to combat a troubled trading mindset?

You would have to make a trading plan and stick to it. This plan aims to have an honest assessment and understanding of the trader’s action. You also need to define your trading methodology.  You would have to master your emotions in order to seize the gains of the trades you made.

Self- confidence is an important attribute.  If you lack confidence then it will show in your deals. Without confidence, you are not likely to trust and follow your prepared plans. Successful trading relies on prompt decision making without excessive emotion.
However, since money is involved people cannot remove their emotions from their decision making process. You also need to be disciplined with your decision making and focus on the right areas.  

How will  you react to the market?

What the market does is not important, the market may lose or may profit today, but what is important is how you react to the market.
A healthy trading mindset will be the difference between long term profitibility and long term loss.