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Trading Psychology - State of Mind
Hi Traders. Today's topic is something I've been highlighting all the time which is trading psychology. Bare in mind, you can have or given the best strategies but still not being consistently profitable due to an unhealthy psychological state. The other day, there was one relatively new trader, 1 month into the business asking for my help, as he was involved in a EU short without any Stop Loss with over 100pips negative. Pray & hope is a common mistake of new traders, if you are watching this post It is likely that you're trying to improve yourself. In this educational post I will be uncovering some of the emotions that we all go through as a trader.
Winning
Ask yourself, how many times when you have an amazing plan, but it got thrown out of the window just because your account was in a huge unrealized profit? Greediness (Euphoria) kicks in, you begin doing things that's not included in your initial plan, you scale-in and over-leverage thinking that this MUST be "that" winning trade. Ego and arrogant starts kicking in, result in irrational behaviour. Always remind yourself that, no matter how good you are at predicting the market, the probability of outcome of each trade remains 50/50. The only way that you can have an edge in the market is by back-testing, and utilize the past data into your advantage to develop strategies that give you positive expectancy overtime. Constantly imprint your initial plan into your brain regardless of how well the position is moving into your favour, have an exit plan beforehand, and stick to it. Things can always go wrong, stay focused.
Losing
Fear comes from hesitation. For majority of novice traders, they're always hesitating clicking that buy & sell button. simply because they're not willing to put in the work to back-test, practice, and learn. Believe or not, I've seen plenty of confident traders telling me that they are going to be "the one". Imagining that they can master the craft within months, but that's simply not the ugly reality. Market decides wherever direction it wants to go, if you're thinking that you can beat the market, you're putting yourself into some self-sabotaging mentality. Usually what happen when traders' in drawdown, is that they'll begin overthinking. Being denial that they 'cant' be wrong, which is a huge warning sign of indiscipline. Result in moving their stops, not cutting their losers quickly, or at worst not having any SL. As mentioned earlier, the probability of outcome of each trade is always 50/50, regardless of how "market genius" you are. If you're wrong on particular position, cut it and move on. Believe in your intuition, when things go wrong, it really does. There's always another trading day, there's always more opportunities, get a break and come back stronger. Imagine your account balance as your bullets, you can't fire a gun without it, do not make unrecoverable mistakes just because of that moment of irrationality.
Emotional Control (Balanced)
This is what every successful trader striving for, which is understanding their own emotions and pull the hand brake when necessary. Every successful trader I've met have one common trait, which is having little opinion in the market. Novice traders always think that to make huge profit, you 'must' know which direction its going. By having little opinion in the market, it allows you to have a peaceful state of mind, allowing the markets to do whatever it wants and stay reactive. "Trade what you see not what you think", stay humble, and be an observant. You do not need to be involved in positions all the time to make profit, successful traders know when to step back and remains rational all the time. Do get it right, being a successful trader does not mean you need to get it right 100% of the time, it is about how fast you are able to recover yourself during a drawdown period, and avoid being sucked into the emotional vortex.
Personally, long long time ago when I first started trading, I got involved in an AUDUSD short position, I was down over 120 pips ended up receive a margin call, blew up 75% of my account. But hey, It was a great experience!
Comment down below what's your worst trading nightmare, and share your experience!
Knowledge is power. Know how to make peace with your losses and profits will come. "The outcome of a trade cannot be controlled, but the mind can be organized to control its performance" - Rande Howell
Trade safe as usual.
Do follow my profile for daily fx forecast & educational content.
Winning
Ask yourself, how many times when you have an amazing plan, but it got thrown out of the window just because your account was in a huge unrealized profit? Greediness (Euphoria) kicks in, you begin doing things that's not included in your initial plan, you scale-in and over-leverage thinking that this MUST be "that" winning trade. Ego and arrogant starts kicking in, result in irrational behaviour. Always remind yourself that, no matter how good you are at predicting the market, the probability of outcome of each trade remains 50/50. The only way that you can have an edge in the market is by back-testing, and utilize the past data into your advantage to develop strategies that give you positive expectancy overtime. Constantly imprint your initial plan into your brain regardless of how well the position is moving into your favour, have an exit plan beforehand, and stick to it. Things can always go wrong, stay focused.
Losing
Fear comes from hesitation. For majority of novice traders, they're always hesitating clicking that buy & sell button. simply because they're not willing to put in the work to back-test, practice, and learn. Believe or not, I've seen plenty of confident traders telling me that they are going to be "the one". Imagining that they can master the craft within months, but that's simply not the ugly reality. Market decides wherever direction it wants to go, if you're thinking that you can beat the market, you're putting yourself into some self-sabotaging mentality. Usually what happen when traders' in drawdown, is that they'll begin overthinking. Being denial that they 'cant' be wrong, which is a huge warning sign of indiscipline. Result in moving their stops, not cutting their losers quickly, or at worst not having any SL. As mentioned earlier, the probability of outcome of each trade is always 50/50, regardless of how "market genius" you are. If you're wrong on particular position, cut it and move on. Believe in your intuition, when things go wrong, it really does. There's always another trading day, there's always more opportunities, get a break and come back stronger. Imagine your account balance as your bullets, you can't fire a gun without it, do not make unrecoverable mistakes just because of that moment of irrationality.
Emotional Control (Balanced)
This is what every successful trader striving for, which is understanding their own emotions and pull the hand brake when necessary. Every successful trader I've met have one common trait, which is having little opinion in the market. Novice traders always think that to make huge profit, you 'must' know which direction its going. By having little opinion in the market, it allows you to have a peaceful state of mind, allowing the markets to do whatever it wants and stay reactive. "Trade what you see not what you think", stay humble, and be an observant. You do not need to be involved in positions all the time to make profit, successful traders know when to step back and remains rational all the time. Do get it right, being a successful trader does not mean you need to get it right 100% of the time, it is about how fast you are able to recover yourself during a drawdown period, and avoid being sucked into the emotional vortex.
Personally, long long time ago when I first started trading, I got involved in an AUDUSD short position, I was down over 120 pips ended up receive a margin call, blew up 75% of my account. But hey, It was a great experience!
Comment down below what's your worst trading nightmare, and share your experience!
Knowledge is power. Know how to make peace with your losses and profits will come. "The outcome of a trade cannot be controlled, but the mind can be organized to control its performance" - Rande Howell
Trade safe as usual.
Do follow my profile for daily fx forecast & educational content.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.