Trading is all about psychology
by Anonymous on 2007-09-23
Many new traders may think that it is very easy to make money, especially when they are trying a broker service using a free practice account.
Generally, those traders generate a substantial performance in a short period of time, thinking that trading is an easy job and that they can easily generate a great revenue out of there trading activity.
Unfortunately, when they decide to start trading with live accounts with real money deposited, the activity becomes more complex and easy days of outstanding day trading performance become suddenly like an old souvenir.
Those fresh traders are just entering in the most difficult step of there training: “the psychology of trading”.
Indeed it is very easy to trade when the risk is of loss does not exist, the trader feels automatically comfortable when the market moves against his positions, so he automatically keeps his focus on his price objective and waits for the market moving in his direction without his personal emotion to interfere.
Emotions are the trader’s worse enemy, they lead most of the time to loss as they are 9 times of a 10 oriented in the wrong direction. Emotions generate what Roland Barach Phd in psychology calls “mind traps”.
Many mind traps have been identified, such as greed, fear, paralyse by analyse etc. All these mind traps exist in any trader, the matter is to recognize them, understand them and try to neutralize them. This process is base of any trader’s training.
A good confirmed trader is someone that masters his emotions and doesn’t let those affect his performance. You can tell a trader masters his emotions when it is not possible to notice if he is making or loosing money by looking at his face.
Following this theory we could think that the perfect trader would be a machine which is not able of emotions like those black boxes build by some scientist. Those machines work for a period of time but can only generate performance during a certain period of time and become quickly obsolete in case of drawdown.
Perfection cannot exist in trading as it is held by humans in a market made by humans but a good profitable trading can be operated by a trader that really knows how to manage his emotions, some people can be already skilled for it but the best way of reaching such a level is the experience made on the market. Before knowing how to win it is therefore important to accept the losses.
Generally, those traders generate a substantial performance in a short period of time, thinking that trading is an easy job and that they can easily generate a great revenue out of there trading activity.
Unfortunately, when they decide to start trading with live accounts with real money deposited, the activity becomes more complex and easy days of outstanding day trading performance become suddenly like an old souvenir.
Those fresh traders are just entering in the most difficult step of there training: “the psychology of trading”.
Indeed it is very easy to trade when the risk is of loss does not exist, the trader feels automatically comfortable when the market moves against his positions, so he automatically keeps his focus on his price objective and waits for the market moving in his direction without his personal emotion to interfere.
Emotions are the trader’s worse enemy, they lead most of the time to loss as they are 9 times of a 10 oriented in the wrong direction. Emotions generate what Roland Barach Phd in psychology calls “mind traps”.
Many mind traps have been identified, such as greed, fear, paralyse by analyse etc. All these mind traps exist in any trader, the matter is to recognize them, understand them and try to neutralize them. This process is base of any trader’s training.
A good confirmed trader is someone that masters his emotions and doesn’t let those affect his performance. You can tell a trader masters his emotions when it is not possible to notice if he is making or loosing money by looking at his face.
Following this theory we could think that the perfect trader would be a machine which is not able of emotions like those black boxes build by some scientist. Those machines work for a period of time but can only generate performance during a certain period of time and become quickly obsolete in case of drawdown.
Perfection cannot exist in trading as it is held by humans in a market made by humans but a good profitable trading can be operated by a trader that really knows how to manage his emotions, some people can be already skilled for it but the best way of reaching such a level is the experience made on the market. Before knowing how to win it is therefore important to accept the losses.
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