I have observed a lot of people really do not concentrate on trading psychology as a subject matter in trading but i will like to try and give them some tips and some information to help them understand themselves and to help them understand their own trading, because it’s an issue that so many people have a problem with. It’s also an issue that very few people actually discuss, but it’s one of those issues within your trading that can help make or break you as a trader. Let’s talk about some of the problems.
Dealing with uncertainties and the emotions involved
Trading, because we’re dealing with an unpredictable market and we’re dealing with maybe trading by yourself, you may be … The other people around you don’t maybe understand what it is that you’re doing and you’re trading with money. All of those things put together make trading quite an emotional business to be in, but everybody focuses on the good things, in terms of their profits, and looking at charts, and what news came out, etc. Nobody really focuses on having the emotions under control within your trading, but there’s several things you can do to actually help you with that.
What type of person and trader are you?
First of all, you need to understand what type of person you are and what type of trader you are. There’s no good trading five minute chart scalping the market if you really can’t stand the stress of watching every single pip move up and down. The other end of the scale, there’s no good taking weekly or monthly chart trades if you can’t stand watching a trade stay in the market for over one day. Understand what type of trader you are and then implement that and put that into the strategy that you trade. There’s no good if you are a believer in fundamental news announcements in just watching charts only. Likewise, there’s no good in just watching the news announcements if you are a technical trader and you like watching the charts.
It’s about finding what blend works for you of time frames, what style of trading, what time of day, etc. All those type of things come into it.
You need a good trading plan
The other thing that you really need is to have a good trading plan and you need to review the trades that you’ve taken. Having a good trading plan, that means writing down the plan, what it is exactly that you’re looking for, for every new trade. How you handle open trades? How you handle or manage losses? What is it that you do with your trading on a day-by-day basis? What set ups are you looking for? What type of trades, reversals, continuation patterns, pin bars, engulf price actions, news announcements etc? What is it that you’re looking for to take in a new trade?
Review that daily. Look at it before you even turn your computer on and get your mind fresh in understanding what it is that you’re looking for before you even look at the charts that day.
Review your trades
Review your trades; what worked, what didn’t work, why did it work, why did it not work, and get an understanding of what happened there. It’s proven that it works when you have a good trading plan, and also a good strategy and an understanding of the market.
Control your risk and eliminate fear
Have controlled risk within your trading. Don’t gamble within the trading. If you have controlled risk and you know that exact amount that you can lose on a particular trade if it goes completely wrong, that helps you with the fear within your trading. You’re not looking at closing early because you think you’re going to lose too much money, or you’re not scared to take a new trade because you think you’re going to lose, because you know the controlled risk that you have. Don’t go gambling, don’t place ridiculous position sizes in the hope that it’s going to outweigh all the losses that you just had.
Don’t revenge trade
In other words, don’t revenge at the market when you get stopped out of a trade. It’s not the market’s fault that you’ve lost in your trades. At the other end of the scale, just because you’ve had a string of winning trades in a row and you’ve made some good money, well done, but it doesn’t mean to say that you’re indestructible. Don’t then go placing stupid trades and give back some of those gains back to the market because you’ve done silly things thinking that you just can’t lose. Get all those things right and it will really help you with your trading.