It’s true what they say… trading success is more about mindset and trading psychology than actual knowledge and strategy.
In this article I’ll dive into some of the lesser known (and incredibly important) aspect of psychology in trading.
Commonly Known Psychological Obstacles
Any trader that experiences any level of success will implement the following aspect of trader psychology. Most are plastered all over the internet in the form of blog posts, education websites or Youtube videos.
Ultimately they come down to the emotions of fear and greed. Understand these and you’ll understand how mass market participants think.
Examples of Fear and Greed in Trading
Fear of missing out on a trade and chasing trades that aren’t there.
Fear of losing accumulated profits and taking profit too early or trailing your stop loss too tightly.
Fear of losing money or being wrong and moving your stop loss further away from price in the hope price will move in your favour.
Fear of losing your full risk and moving your stop loss too close to price.
Taking too much risk or too large a position size.
Trading with stop losses that are too tight.
Trading too frequently (linked to fear of missing out).
Jumping into trading before you’re educated and ready.
Overcoming Fear & Greed
Work past these emotions by repetitively implementing a proven probability edge in the market and you’re on for a long and lucrative trading career.
Easier said than done, right?
Trying to seperate your emotions from the fluctuation of your hard earned money can be challenging.
However, once you have your trading plan, a proven mechanical strategy and routine in place, you’re on the right path.
Work on developing your patience and discipline. Make your trading process a habit and any self sabotaging behaviors should diminish.
Set goals around implementing your trading plan and daily process, rather than monetary goals. Keep it as mechanical and consistent as possible and there’ll be little room for decision making outside of your written rules.
Focus on your process, rather than the money. Once you have the process dialled in a non-emotional way, the money will come in time.
Trading Psychology & Belief Systems
I don’t know of any other traders talking about this. Its vital to success in anything, but for most successful traders, there’re probably not aware they’re doing it. For unsuccessful traders, of course they’re unaware they’re not doing it.
I’m hugely into self development and the mind. I’ve done hypnotherapy in the past, I meditate daily and am forever learning about how belief and the subconscious mind works. It fascinates me!
So if you’re struggling with your trading psychology, becoming conscious of what i’m about to explain and making some changes could drastically improve your results.
Ever wonder why truly confident people consistently seem to win at life? Its because deep down they believe they can achieve.
If you’re a new trader and you don’t have a proven strategy with statistically relevant backtesting results, you have no proof your trading will work. With this you lack belief.
With back testing comes belief in your strategy. Backtesting gives you data on potential drawdowns. This means you won’t look for another method as soon as you take few losing trades. Back testing gives statistics, and statistics don’t lie!
Reprogram Your Subconscious Mind
If deep down you don’t have belief in yourself and your trading you’ll unconsciously self sabotage.
As soon as you’ve put in the work to prove your trading strategy is profitable your belief system begins to change.
Now you know you’re a profitable trader. From this belief your conscious and subconscious mind work in harmy to execute your trading edge towards your goals. No more self sabotage!
On the flip side, some arrogant newbies think they can leave the rate race because of trading within a few weeks. This isn’t belief in something real, this is delusion. You still have to put in the work and be patient.
The ultimate goal is to reprogram your subconscious mind with the beliefs and habits of a successful trader.
Start by thoroughly back testing your strategy or investing in a mentor who already has. From this you need to have a good understanding of the intricate details of your strategy statistics, as well as how they’re likely to play out through random probabilities.
Create some process oriented goals, as well as a mechanical trading plan with rules to follow.
Finally, have confidence in your trading and you’ll start to develop a deep belief in yourself and your strategy’s profitable performance!
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