Trading psychology, to put it simply, is the concept that encompasses all of the thoughts and emotions that traders encounter on a daily basis. It is not anything that can be easily managed, but it is something that must be mastered with time and practice in order to progress in your trading career.
Fear and greed are the two emotions that move the markets. All of the negative aspects of trading psychology can be traced back to these two emotions.
Investor sentiment often steers market performance in opposite directions from the fundamentals.
Fear and greed, the two human emotions the drive that sentiment, are regulated by the effective investor.
Understanding this will help you develop the discipline and objectivity necessary to profit from other people’s emotions.
Here’s what you’ll discover to help your trading psychology.
Backtest your plan to increase your trading interest.
How can you find the trust to sell your trading plan during a drawdown if it doesn’t have a market advantage? You’re not going to succeed. Instead, you’ll begin searching for the next “best” trading tactic, and the cycle will continue.
Keep a record of your trades.
You can record your entry, stop loss, and exit once you’ve found your trading setup. Rep the procedure before you reach the current date. Then compile all of the data to see if you have a competitive advantage in the markets.
“Are you sticking to your trading strategy?”
If the answer is no, immediately exit the trade and stop trading (whether you won or lost).
Set your stop loss and walk away from your terminal if the response is yes (knowing you’re doing the right thing and your risk is contained).
This is straightforward, but it works. It separates you from the results of your trades and keeps you focused on sticking to your strategy.
Is there something you’ve tried that has helped you develop your trading psychology?
Do share with us on the comments below.
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