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Trading Psychology

Trading. Emotions.

Novice traders make a very serious mistake, deciding that, having mastered the technical and fundamental analysis, they will be able to achieve certain heights in the trade. In fact, the most important skills that will allow the trader to become successful is to control emotions, because they have the greatest influence on the results of your trading.

If successful trading was limited to only one transaction, it would have been much easier. But trading the financial markets, you will have to perform a large number of transactions, adhering to its strategy. Successful trading is determined by the number of transactions made by the trader. A trader, who wants to succeed in the financial market, is obliged to adhere to the chosen strategy and not allow emotions to get him away from the chosen path. And here in the first place there is discipline. It is very important to ensure that whatever deviates from its strategy even during drawdowns. However, the emotions in these moments make people not behave as usual, is not always logical. For the beginner or for the inexperienced trader, emotions are inevitable and they often interfere with an objective decision. This puts the control of the emotions in the first place on the list of skills that you need for a successful trade.

When emotions do not prevail over the trader, the trader thinks clearly, we can say that it is in the comfort zone. From there, the trader monitors their behavior and can follow its strategy logically and systematically. The main task is to find your comfort zone. Some traders quite easily find it and enter into it, but even those of the trader, for whom this is done seriously, can learn to control their behavior and become emotionally independent of all emotions in trading. Is most "influential" in the outcome of the trader, are fear and greed. Often they are forced to deviate from its intended trader trading strategy. When a trader is afraid to lose, he makes every effort to avoid it. This in turn can lead to even 

greater loss. Let entering into a transaction, the trader sets a stop loss of 10 points. That is, based on fundamental and technical analysis; it is assumed in the transaction that the price may go away temporarily down. But it is subject to the fear of having a large loss and closes the deal when the price reaches drawdown of 5 points. If the deal ultimately would have been profitable, the trader himself turned her into losing just because of fear. Also works and the fear of losing profits. If set take profit of 30 points, and seeing minimal profit trader, closes the deal, it deprives him of the good winning trade. In the end, the trader simply "kill" their strategy making it unprofitable or bringing in less profit.

The same scenario is trading when the trader prevails over greed. If, on the trading plan, record profits at a certain level, but in the process of transferring this level higher and higher, eventually, you can lose all profits and turn a good profitable trade in unprofitable.

Another "flaw" in the work of the trader is his ego. Under the influence of his, a man is not willing to admit their mistakes. Suppose transaction is not very good and the trader instead of simply closing a losing trade, as it offers a strategy that keeps the position. He just does not want to accept the fact that in its calculations somewhere crept error, thus it increases their losses. Another scenario: after the loss to the apparent great deal, the trader is not looking for a suitable option for the following on the basis of the strategy. He will simply continue to enter the market on the basis of their initial analysis, as believed in what he was absolutely right.

There is a concept in trading as trade in revenge. In fact it is the pursuit of the losses that have been incurred trader. The man is so focused on getting their money back, that does not notice that it works without a clear strategy and each new deal brings regular losses.

In order to avoid the influence of these factors, you need to create your own trading discipline. It will help you more objectively assess the market. You are more likely to stay calm under pressure of the market, if you are confident in your trading strategy. And when the strategy is not sufficiently well tested, it leads to doubt, which in turn can allow fear to master you. Therefore, testing and further development of your strategy should be carried out on a demo account where you will not feel added pressure of losing real money.

It is necessary to remember one simple thing. There is no strategy with 100% positive result. Be prepared for losing trades. A successful trader can take the loss as part of the strategy, and simply move on to the next deal, not allow fear or greed to influence future actions.


Trading. Psychology

Starting your way in teaching trading, should understand that this is primarily a psychological process. Since learning the trade, a person goes through several stages of development of their way of thinking. The most common model of learning in the trade - is adapted from the model developed by Gordon Trading International, competence in four stages. It has been redone and it includes the fifth stage - the moment of awakening.

The first stage of this model - unconscious incompetence. This initial phase, through which the novice trader. The bottom line is that people do not know that it has insufficient knowledge. At this stage, new traders learn the basics of markets, software, open an account and begin to make deals. At this stage, a huge influence on the process of trade have emotions. Everyone thinks of "quick money more money." With traders at this stage there is one of two options. The first transaction Once same goes in the wrong direction. Trader's just look at how their losing trades reduce capital. Can close the deal and take a position in the opposite direction, but here they will fail. They just do not have enough experience to deal with the behavior of the market. Second, the transaction goes in the right direction, but being motivated by a false sense of security, traders put large sums, losing all previous gains, and often will drive the deal in a negative result. This is due to the fact that beginning traders do not even have basic knowledge about risk management.

The second stage is conscious incompetence. Here to person usually comes the understanding that you must learn. Usually at this time to check the traders begin to practice the knowledge. Which they have received from a variety of sources (books, magazines, the Internet), asking for help from the "paid" experts. At this stage, with poor results, the trader is trying to put the blame for the failures of others, rather than trying to analyze their behavior. This step is most dangerous for beginners. Here is a very big chance that people will stop in its development, will stop to analyze their behavior and finishes trading. You stick to the system? Using a trading journal? Revises the previous deal? Take responsibility for their losing trades? A negative answer to any of these questions means that you're stuck in this stage.

The third stage. The moment of awakening - this is when a trader begins to realize that trading successfully depends on the psychology of the trader and his approach to the markets. At this stage of training begins to develop an understanding that you can never predict what will happen with the market. That making money is not one of the successful transaction, and series of both successful and not so successful transactions. That requires discipline to work your strategy. At this stage, the trader starts to make the deal when he speaks of this system, not discerning and not paying attention to the emotional background.

In the fourth step, conscious competence, the trader reaches such a level that it no longer selects the "winning" deal. When the system did not tell him to enter the market. He does it without paying attention to your feelings. At this stage, the trader still susceptible to emotions and it still needs to spend some effort to maintain discipline. But with unprofitable deal is easier to handle, comes the ultimate realization that they are part of the process of making money. When managing trade for the first roles beyond the ability to manage risk, and no desire to get rich quickly.

And the last stage - is unconscious competence. This step is achieved over the years. It deals are virtually automatic "mode", and the discipline has become second nature.


The most important message in the psychology of the trader is to understand that you can’t be born a trader – you can only become one!