Why Is Trading Psychology Important?

Posted by tradeyouredge on October 14th, 2014

Some traders succeed and some traders don’t. Meanwhile, there is also a group of clueless traders who constantly win some and lose some, having a consistent net result of only breaking even.

However, when questioned, many successful traders cannot explain why and how they become successful. Unfortunately, the answers are rarely consistent and that’s because most of them only discuss scenarios within their own experiences and rarely more than that. Some will argues that they have better technical know-how while others just think they are more courageous but that’s really about it. On the opposite end, struggling traders almost always only blame the market – they think they are in the wrong market, using the wrong tool or they don’t have a good coach – they think the world is at fault.

Why is Trading Psychology Not Publicised?

A more intriguing question that you should ask is this – If trading psychology is important, why is it not well publicised?  Well, that’s because of the simple fact that new traders are not educated or informed in this area. The education of the conscious and unconscious mind is not published within the trading community.

The result of that this is – once traders learnt enough of the technical knowledge, they don’t know what else to focus on. In other words, traders don’t know what they don’t know and they struggle to identify how they can improve. Hence, many of them leave the trading arena.

What is Positive Trading Psychology?

Good Trading Psychology is about having the right emotions, the right mental state combined with the right technical expertise to achieve what ever you want in the financial markets. Trading Psychology is also about having the ability to consciously take control of the unconscious mind, so that your investment decisions are congruent with your behaviour and beliefs.

Trading psychology is just the layman’s answer for describing this subject. Below all that is the intrinsic relationship between the conscious and unconscious mind that really makes the difference between success and not-so-successful stories. Conscious mind (4%) is everything you are aware of right now and (96%) Unconscious mind is where everything is imprinted. People, especially traders, don’t realise how much their unconscious mind can do.

The situation gets a bit more challenging when traders are constantly influenced by external or internal factors which are not within their trading plan. These factors often cause traders to make irrational decisions. There would also be occasions where recency bias which cause their emotions (e.g. Fear or Greed) to take control of their decisions.

How Do We Work on Trading Psychology?

Firstly, we need to learn to belief in ourselves and to belief in the financial markets. Then, we learn to use the right tools to maximise our self-beliefs and market beliefs so that we can take guided actions. Those actions will help us take advantage of what the market has to offer us. With positive feedback and, hence, leading to positive learning, that will help feed into the continuous growth in those positive beliefs. That positive belief cycle is the key to building good trading psychology.

At the same time, we can also work intensively on the belief systems – the primary beliefs systems being our self-beliefs, market beliefs and system beliefs. By working, I mean to identify and eliminate on what ever is holding you back from being profitable. On the flip side, we will also pin point what is required to push you towards positive growth and results. 

With that, I would like to invite you to subscribe to our newsletter and I truly hope you can enjoy and gain from our website. Join me here if you truly want to achieve financial wealth. Having the right trading psychology allows you to build a life free from financial concerns.