Psychology is something many swing traders and traders avoid. The fact that many traders neglect or avoid this is the main reason they suffer or perform poorly in their trading regardless of the market or the size of their trading capital. If you truly wish to put yourself on the path to success then it is something that you shouldn’t ignore.
The term psychology here refers to managing yourself while trading. Trading induces a wide variety of emotions and reactions in people, especially when they begin to suffer a loss or start making a profit on a trade. Many people lose control when it comes to trading and the thought of how much money they might possibly earn clouds their judgement.
Why do many traders think trading psychology isn’t important or it’s a a joke? Simply because they are afraid that they might learn things about themselves which will hurt them. This is the same kind of fear that ruins a good trade.
Whether or not you succeed in the long run in trading depends on you. Are you mentally prepared to win or lose? Changing your thinking is crucial to being successful in trading.
How good your trading system is or how much money you have to trade with has nothing to do with how successful you will be at trading. It is what you do with the money that matters. Trading will allow you to multiply that money and increase the amount you have, if done properly.
There is a common belief that the larger your trading account, the more money you’ll make. While there is some truth in this, ultimately it still comes back to the way you think. If you have set yourself up to lose, it will only be a matter of time before even your account, regardless of its size, has been blown up.
Have you ever entered into a larger than normal size trade, had the market turn on you, you exited the trade, only then to find that the market continued on without you? Why did you exit this trade? Most likely it wasn’t because you believed the market conditions changed, but because your emotions got the better of you.
In order to set yourself up to win, you are going to need to change the way you think. For many people this is going to be hard. This won’t happen overnight. However, if you don’t change the way you think, then there is little chance that you are ever going to suceed at trading.
Emotional discomfort is part of trading. There are only two ways it comes to you:
1. Losing more money than you planned on.
2. Making the changes you need in yourself so the first point doesn’t happen again.
If you have ever lost more money than you planned it was because you exceeded your own risk levels and a trade went against you. When the trade turned back and went in your direction again, the emotions probably went away, but you lost control of your emotions for one of two main reasons.
First, you had more money at risk than you were OK with. Second, you entered a trade you weren’t 100% confident in. Maybe you didn’t have a perfect trade setup or you jumped the gun early and didn’t wait for confirmation.
The first situation is one that traders who don’t have their psychology in check often find themselves in. If you have your psychology in check, the second situation (which is less threatening and easier to correct) is one that you should only ever face.
Part of trading successfully is ensuring that you follow your trading plan and stick to the rules. Beyond this, many traders, once they have several successful and highly profitable trades under their belt, begin to assume that they can outsmart the market.
As soon as this happens they are more often than not dealt a severe blow and suffer huge losses. The market has basically taught them a lesson. You are NEVER smarter than the market.
Always plan your trade and trade your plan. When the time has come that you have a trading plan or system in place with rules, make sure you stick to them and trade accordingly. Moreover, never assume or expect the market to do something. The market will do whatever it wishes and is beyond the control of anyone.
Instead, learn to be in control of your emotions and not let the market control them. Changing the way you think won’t happen overnight, but it will happen if you really want it to.
This will place you in the right frame of mind and allow you to pull the trigger on winning trades with greater consistancy.
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