Trading success is dependent on your psychological state of mind, despite your trading system, strategy or money management skills. Pulling the trigger on a trade is not easy. Stress and life pressures affect your trading and can wreak havoc. Your biggest enemy when trading is within you. You must learn to control your emotions while trading or you’ll never be a success. Psychologically it’s not easy to sit in front of a computer screen all day. This is not a 9-5 job and your financial life depends on your success if you are trading full
time. You must have confidence in yourself, your strategy and your ability to be successful in both up, down or sideways markets. You must do your own homework and have confidence to be successful as a trader. Eliminate emotions when you trade. Have a winning attitude. You’ll have up days and down days…wins and losses…it’s inevitable…it’s part of trading. If a trade doesn’t work out right away, limit your losses…move on…and forget about it. People react in a certain way when under pressure. They let emotions rule. They doubt themselves and that leads to mistakes. Follow your system until it doesn’t work anymore. Strive for consistency in your trading. You must believe in yourself. That’s the key. You must maintain the right psychological mindset to be a success at trading. Know your risk tolerance so you can sleep at night. Don’t over trade or stay in a losing trade. Preserve your capital to live and fight another day.
So…why trade the markets? First off, trading is a business and you should treat it as such. Your money is on the line. There is always a risk in trading. You must go after high probability trades and achieve higher gains on your winners than losses on your losers and you’ll be successful. You must learn to keep your ego and emotions out of the trade. You must always trade with a plan…Trying to be perfect keeps traders from taking losses quickly. They simply won’t admit their mistake and move on. Always remember to protect your capital and deploy it elsewhere. As they say….cut your losses early and ride your winners. You can always scale into a trade by buying 1/3 of a position…then as it moves up another 1/3…and then on more of a move up buy the last 1/3. Don’t become too confident on winning trades or too depressed on losing trades. Emotional and psychological acceptance of risk is what determines your mental state in each trade. The old saying of “know thyself” applies here. People in the market react as a result of greed and fear. That is why charts and their formations and patterns keep repeating themselves over and over. Markets are driven by humans and human nature never changes.
What you believe about money is what your reality will create. If you think it’s hard to make money in the stock market…it will be. It becomes a self-fulfilling prophecy. Negative thoughts and beliefs about money will keep you from succeeding in the market. Psychology plays a major role in trading. The trade either works or it doesn’t. The market doesn’t care one way or the other. Markets remain neutral at all times. It’s our beliefs about the markets that cause us happiness or pain. Losses are part of trading. Taking small losses is part of a successful trader’s job. There are risks associated with trading the markets. You must accept full responsibility for your trades. When a loss occurs, don’t get emotional and all full of fear. You must always think and trade in probabilities. Watch your emotions at all times. Focus on what the market is telling you…not what you want it to do. Have your head in the proper place. Be present in the moment. If things are not going well, or you’ve got other things on your mind…step away and do not trade. Trading involves discipline. Keep your emotions out of it…period. Emotions do not ever belong in trading. Just stick to your trading plan and no emotions. Think in probabilities. Keep a lid on emotion while trading once you have a trading system that is working for you. Trading becomes 100% mental. Stay disciplined. Don’t let fear rule you or you’ll make mistakes. Don’t get scared…don’t give in to fear…just build your confidence.
Your system should have a predetermined entry and exit with a stop loss and therefore you’ve taken the emotion right out of the trade. Line up the trade and take it based on your strategy and set of rules. Stick to your set of rules, don’t get emotionally tied to a trade. Deal with the probability of the trade. Limit losses by using stop losses.You can become a great trader by simply finding a strategy that works for you and understanding the psychology of the market. You must overcome any beliefs you have that would cause you to make money losing decisions. You can prepare yourself psychologically to trade the markets and take profits out of the market. Trading is hard work. You will need discipline and commitment to learning every day. It’s much easier to listen to others than educating yourself. Remember, the market is really just about human nature and psychology. The market is driven by greed and fear…optimism or pessimism…sometimes a stock or option you bought to go up starts to go down…and our nature is to hold on and wait for it to turn around instead of just cutting it loose. Why? Because we don’t want to admit we were wrong…we want to believe it will go up…if we sell now we have to accept a loss and we are not psychologically wired to do that. That is the wrong way to think. Do not make that mistake. Get in…get out…move on. Why tie up money for who knows how long when you can move on to the next money making trade. If the stock or option happens to turn around after you got out, you can always get back in if your rules and strategy dictate it…but for now….get out of the trade and preserve your capital and live to fight another day. If you are not psychologically prepared to have small losses, then don’t be a trader. Do not trade emotionally…ever. Don’t chase stocks up in a panic and sell for large losses. Plan your trade and trade your plan. Never expect to lose money on a trade. Limit your risk, and protect your capital always. You just have to make more money on your winning trades than you lose on your losing trades and you’re ahead of the game. The market is just a huge marketplace with people who are trying to take your money and everybody else’s. It’s a zero sum game. One wins and therefore someone else loses. They are using basic rules of human nature and psychology. If
you want to play the game you must have the right tools and mindset. The market is filled with patterns and behaviours. The emotional side of people is what causes
the ups and downs of the market. This causes the swings of the market which in turn you can profit from. Just keep your emotions in check, anticipate the
behaviour based on human nature and psychology. The market is driven by the emotions and psychology of the players in it. Because of this we see patterns that happen over and over. There are support and resistance levels…run ups into earnings….sector rotations…trends and counter trends…and news events. Everything happens as a result of motivations of those trading the markets. We trade psychologically and emotionally. You must learn to control your emotions and not sabotage your trading. Greed and fear in the markets are the enemy of traders. Greed makes traders hold on to their positions when the trade turned against the. By using technical analysis with rules, strategies and money management skills you can overcome the emotion of greed. You don’t need to win on every trade. That’s not reasonable or realistic. Learn to control your fear. Know why you got into the trade…identify your target on when to get out of the trade and stick to your plan…otherwise you will get out too soon. Cut your losses…and let your winners run…that’s the psychological secret to
successful trading. Fear just causes panic buying and panic selling. Plan your trade and trade your plan.
Ok KaizenTraders…keep learning….keep improving your trading psychology…make constant improvements…work on becoming a great trader and a great person…be
good to yourself and others…make the world a better place because you were here…look after your health…both physically and spiritually…your finances…and
your relationships. Be grateful and happy and spread it around…keep yourself balanced and all the best in your trading.
Regards…Rick
