Trading Psychology
When it comes to trading, one of the most neglected subjects are those dealing with trading psychology. Most traders spend months and years trying to find the perfect system, but a system is just part of the whole picture.
Trading successfully requires special attention to four important subjects:
Having a system that perfectly fits the trader
Using Money Management
Understanding and dealing with psychological barriers that affect successful trading.
Having well developed risk and trade management techniques.
Focusing on just one or two of these aspects is like trying to sit on a chair with one broken leg: you will fall down – if not immediately, eventually.
All of them are equally important; all of them should be taken in consideration.
We have talked about money management, risk and trade management, now it is the turn to talk about Trading Psychology and good Trading Habits.
This lesson’s main objective is to make you understand the importance of certain habits and psychological strengths you will need to develop in order to achieve success in trading. They are not going to surprise you because you need almost all of them to achieve success in other areas of life. However, when it comes to trading most of these aspects are ignored or traders don’t give them the importance they deserve.
One of the main reasons these habits are often ignored is because traders are only focused in the potential gains the Forex market offers. They think “why would I spend some time developing such habits if I can be making money just now”. But later in their careers they find out that these habits are required to achieve trading success. They find it the hard way, when there is no money left on their trading accounts and they are devastated emotionally. And believe me, trying to recover from these experiences is far more difficult than giving them the importance they deserve at the beginning or at some midpoint in your trading career.
Trading successfully is all about having equilibrium between many important aspects of trading; such as having a system that fits you, applying sound money management techniques and being aware and handling the psychological issues that affect the decisions made by traders. Without developing the habits outlined in this lesson, you are not going to be able to master every important aspect of trading. On the other hand if you develop these habits you are going to master all important aspects and will achieve consistent profits trading the Forex market, it is that easy.
Therefore, I suggest you to work on them and try as hard as you can to develop them as they are an important feature of trading successfully the Forex market.
The difference between success and failure in all areas of life is based on behavior. Successful people adopt certain behavioral traits or habits that help them move in the direction they desire, unsuccessful people just move with no clear direction.
The topics covered in this lesson are:
Section 2: Being wrong
What it means to be wrong? Most of the time being wrong is connected to the outcome of the trade, we will see why and how to properly deal with mistakes.
Section 3: Risk Takers and Market Uncertainty
We traders are risk takers but deep in our minds most of us don’t accept that fact. No one knows where the market will be the next minute, hours or days to come. We only play by probabilities; we need to understand this important concept otherwise psychological factors such as fear, greed or hope will block our minds.
Section 4: Having the Discipline to Follow Your System
Business Plan, MM, TM and RM Plans, vital for success as well as being able to sleep at night
Section 5: Commitment, Patience and Responsibility
The cornerstones on being able to survive the journey long enough to be successful and then the strength to improve and achieve balance and consistency.
Section 6: Business Plan
Having a business plan is an important aspect of trading
Section 7: Trading Journal
We talk about the importance of having a journal. You can copy my journal
Section 8: Summary
Brief summary of the chapter