Anyone who has been trading for a bit of time knows the importance of having a strategy from which your trading is built around. Without a strategy, you can’t possibly expect to make an income from your trading.
The same goes for your trading psychology.
Whether you are trading with a company or for yourself, independent work is a big driver in forex. You have to rely on yourself to notice and fix mistakes, be honest about your performance, keep your journal detailed and a whole lot more.
Perhaps the biggest, though, is maintaining your mental stability when trading.
Do you ever take trades out of anger, greed, or even because you are a bit impatient at the time? Not being aware of the setbacks these and other psychological barriers have on your trading will cost you money.
Forex requires a boat load of self-discipline, patience, and organization. These are just a few of the difficulties that trading psychology brings about for traders.
So, in this blog post I am going to give you a quick beginner’s guide on trading psychology to help you make a start on improving your trading psychology!
The first step in working on your trading psychology is to realise the importance of being self-aware.
But what does that actually mean?
Whenever you take a trade, you are going to be in a certain mental state. You may be calm, confident, and in a steady mindset.
Or, you could be frustrated, impatient, resulting in an unstable mindset.
Clearly the former is a better option for your trading performance. So, when I say being self-aware is the first step, it means understanding your current mental state, whether you should even be trading and, once you are experienced, adjusting your emotions and mental state to be in their best place for your trading.
The only way you can begin to do this is by being self-aware of yourself and your current psychology. No one else can make those adjustments for you – though you can get help in noticing where you are putting a foot wrong.
If you can foster some self-awareness then you are on your way to controlling your trading psychology. This can be a difficult step though – it requires humility, honesty, and an acknowledgement of your weaknesses.
Don’t underestimate the difficulty of doing these things, especially when you are only answering to yourself. It will be extremely tempting to give yourself excuses.
Afterall, we judge ourselves on our intentions and others on their actions.
In this instance, you need to judge yourself on your actions because your intentions will not be making you any profits. It is that simple.
Being aware of your psychology is necessary, but we need to see results and carry out some action…
You may have seen a shirt I wear in some of my videos:
‘Discipline Equals Freedom’
These are words I live by in forex and it extends to just about every aspect of trading. When it comes to psychology, it is going to help you in big ways.
If you are disciplined and organized there are going to be few things that come unexpected. Even the things that catch you off-guard will have their impact reduced because you are prepared.
Being in a state of confusion, anger, uncertainty etc. will have a massive impact on your psychology and have a knock-on effect on your profitability. We want to avoid these things.
Stability and objectivity are your friend when it comes to yourself in trading. Obviously volatility is great on the charts as movement = money, but if you yourself are volatile, you will be erratic and have results that vary wildly often resulting in lost trades.
So be disciplined and come to rely on yourself. If you cannot rely on yourself, you can’t rely on your trading.
Fortunately, you can practice your discipline in all areas of life. Running a business for over 15 years has taught me the value of self-discipline and I promise you, if you foster your own you will see results.
Perhaps the toughest aspect of your trading psychology is mastering your emotions.
Look, we have all been in tough trading situations. Losing streaks, profits missing out by a couple of pips, stop losses being hit only for price to turn around…
These things are all annoying and can easily make you angry, frustrated, or defeated.
But if you let these kind of emotions takes over, your trading decisions will suffer and thus your results. Controlling and being self-aware of these moments is fundamental to your sustainability and long-term success.
There are several key areas that you need to keep an eye on when it comes to your emotions.
Recognizing the importance of these areas is pivotal to your success.
Get in the habit of identifying whenever you feel greed or fear coming up. Take note of when you feel impatient when you are looking to take a trade.
These all serve to push you toward a more subjective approach to trading whereas we want to maintain a predominantly objective approach.
It is your task to keep keep your mental ship stable, maintain the boat’s course, and have a watchful eye for any obstacles or hindrances that you come up against.
One of the best ways to stay on top of all this is to have a column in your trading journal where you can note down what state your psychology is in.
It is simple but it will allow you to keep track of your progress, your discipline, as well as match up your results to your mindset. It is not enough to make a half-hearted attempt with your psychology.
Concerted effort is needed – if you find there are better ways then share them in the comments below! I know a few of my members practice meditation so it would be interesting to hear other methods.
#Forex #Trading #Psychology #Beginners #Introduction
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