Anyone who has been trading for a while knows how important it is to have a plan for how you will trade. If you don’t have a plan, you can’t expect to make money from trading.
The same goes for how you think about trading.
Independent work is a big part of forex, whether you trade for a company or on your own. You have to rely on yourself to find and fix mistakes, be honest about how you’re doing, keep a detailed journal, and do a lot more.
Still, keeping your mind clear is probably the most important thing when trading.
Do you ever make trades because you’re angry, greedy, or even just a little impatient? If you don’t know about these and other psychological barriers that can hurt your trading, you will lose money.
Forex trading requires a lot of patience, self-discipline, and organization. These are just a few of the problems that traders face because of their own minds.
So, in this blog post, I’m going to give you a quick beginner’s guide to trading psychology to help you get started on improving your trading psychology!
Self Aware
The first thing you need to do to improve your trading psychology is to realize how important it is to know yourself.
But what does that mean in real life?
When you make a trade, you will have a certain way of thinking. You may be calm, sure of yourself, and in a steady frame of mind.
Or, you could be angry and impatient, which could make you have an unstable mind.
Clearly, the first choice is better for your trading success. So, when I say that being self-aware is the first step, I mean that you need to know what your mental state is right now and if you should even be trading. Once you have more experience, you can change your emotions and mental state so that they are in the best place for your trading.
You can only start to do this if you know yourself and your current mental state. No one else can make those changes for you, but someone can help you see where you’re going wrong.
If you can learn more about yourself, you will be on your way to being able to control your trading psychology. This can be a hard step, though, because it requires you to be humble, honest, and aware of your weaknesses.
Don’t forget how hard it is to do these things, especially if you only have to answer to yourself. It will be very tempting to make excuses for yourself.
We judge ourselves based on our intentions and others based on what they do.
In this case, you need to judge yourself by what you do, because what you mean to do won’t make you any money. It’s that easy.
It’s important to understand your own mind, but we also need to see results and do something.
Self Discipline
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 surprises. 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 huge effect on your mental state and will hurt your business in the long run. We don’t want these things to happen.
When it comes to trading, stability and objectivity are your friends. Volatility is good on the charts because movement equals money, but if you are volatile, your results will be all over the place and often lead to lost trades.
So be hard on yourself and learn to depend on yourself. You can’t trust your trading if you can’t trust yourself.
You can be disciplined in all parts of your life, which is a good thing. Over the past 15 years of running a business, I’ve learned how important self-discipline is. If you work on your own, I promise you’ll see results.
Emotions
Keeping your emotions in check may be the hardest part of your trading psychology.
Look, we’ve all been in tough situations when we were trading. Losing streaks, profits just missing by a few pips, stop-loss orders being hit, and then the price turning around…
All of these things are annoying and can make you angry, frustrated, or feel like you can’t do anything.
But if you let these kinds of feelings control your trading decisions, your results will suffer. Controlling and being aware of these moments is key to your long-term success and being able to keep going.
When it comes to your feelings, there are a few key things you need to keep an eye on.
- Patience
- Greed
- Fear
Recognizing the importance of these areas is pivotal to your success.
When you feel greed or fear coming on, make it a habit to name it. When you want to make a trade, keep track of when you feel impatient.
All of these things push you toward a more subjective way of trading, while we want to keep a mostly objective way of trading.
Your job is to keep your mind steady, keep the boat going in the right direction, and keep an eye out for any problems that might come up.
One of the best ways to keep track of all this is to have a column in your trading journal where you can write down how your mind is doing.
It’s easy, but it will help you keep track of your progress, show how disciplined you are, and compare your results to how you think. It’s not enough to just sort of try to understand psychology.
There needs to be a group effort. If you find better ways, please share them in the comments below. Some of my members meditate, so it would be interesting to hear about other ways to do it.