Psychology and Trading


In a perfect world, we’d trade like robots. We’d make our plans, build our systems (with an edge), and execute our transactions… all while scrupulously adhering to our regulations. We’d seize opportunities as they came and wait until either our PTs or stops were hit. However, we are not algos or scripted—we are human beings who may be quite emotional!

Trading psychology is really important to me since emotions often get the best of us. If you don’t identify or comprehend your emotional condition, your portfolio will suffer since you’re probably not functioning properly. Trading requires you to be as impartial, reasonable, and unbiased as possible.

Consider this: emotions are at the basis of the majority of our errors. We are our own worst adversaries. We’ve all felt fear, greed, hope, exhilaration, worry, boredom, irritation, terror, and so on. Unfortunately, most people cannot simply switch off their emotions since many of us (particularly those with smaller accounts) have a relationship to money. We want the wealth, the five-figure days, and so on. We have hopes and aspirations, but we may not be ready or operating at that level to have such hopes and dreams. All we can do is acknowledge our emotions, conceal them, and properly control them.

It is critical to be self-aware of our faults and emotional condition in order to effectively handle these issues and progress in our trading. You know how you feel and whether or not what you’re doing is correct because your gut tells you.
You’ll know if you’re: revenge trading, over trading, suffering from hopium (and doubling down on losers), holding through catalysts (expecting a lottery win), being scared to press the trigger and take advantage of an opportunity, changing your plan (for no good reason), HODLing (and not scaling out because we want a home run), chasing an overextended play, forcing trades out of boredom, or oversizing because we want a big $ gain.

Determine prospective issues before they emerge and become a reality. Discipline is what keeps you from becoming dumb.

Trading is a psychological as well as a technical game, therefore regulating and managing your emotions is essential. No matter how much you know, you cannot be overly emotional in this game.

We all experience emotions. However, you must learn how to break free from them and return to a condition of equilibrium in which you can think and respond effectively.

In my perspective, what differentiates great traders from decent traders is psychology.

Once you’ve learned to detect support and resistance, as well as volume, the information will be the same whether you’re a novice or an expert.

The ability to hold a move through all of the bullshit games and numerous emotional states is what distinguishes outstanding traders. They don’t always play for pennies, but for the meat of the move. Beginners lose out on the meat of the move because they are afraid… they are afraid that the trade will turn red on them, that they have the wrong trade concept, that this, that, and the other. An skilled trader, on the other hand, does not feel this way. In summary, excellent traders have patience and trust their instincts unless: 1) there is an evident red light that indicates they should exit, or 2) their strategy pushes them out since their risk has been met.