Trading Psychology in Action

We bet you want to be safe and protected from the world troubles. You would preferably curl up in a cozy armchair of a family house and have somebody by our side telling:

‘You are doing great! You will succeed. You are strong and capable. The whole universe knows it and is ready to welcome your special self.’

The sarcastic ‘haha’ flies to your face whenever reality strikes. People can be rude, words may hurt, food is potentially poisonous, and the weather is out of your control. On top of it all, you are a trader. Insecurities are all around:

• The market is volatile and will stay like this forever
• You are no expert, and multiple charts make your brain boil
• Money raised yesterday may turn into dust today.

Well, trading is not the best sphere for mental comfort. Enough of spooky stories though, the good news is – you’ll survive and succeed anyway! We are going to find out how.

Diagnose your Problems

Let’s face it: your emotions may take over your actions. When you accept the fact, you are ready to learn how to keep calm and trade responsibly.

Here is a list of the most common psychological issues you might face. Do not hurry to pay for a shrink; we may help.

Market anxiety

You tried trading here and there, got your glorious profit and experienced an inevitable loss. You liked the first one and hated the latter. However, for a while, it was fine, and you embraced reality. Then you were losing again and again. That’s how you earned your performance anxiety. The fear of loss is now overwhelming and paralyzing. The feeling of an impending failure makes you sweat at the family dinner and wake up in the middle of the night.

Relax and accept the situation

You should understand that a loss itself is not a threat – the way you interpret it is. Stop associating losing with strong negative emotions and replace it with positive motivation. For example, in the case of traumatizing loss, spend some time on researching new strategies and markets. Your curiosity will take over fear, and you’ll come back to the market with a fresh vision and creative solutions.

Another interesting fact about failure that may not be obvious – it shows you the way towards growth. By overcoming the losses and anxiety behind them, we leave the comfort zone and push the limits of what we are capable of. See your failure not like a deadly jump from the Niagara Falls but rather an exciting ride on the world’s highest rollercoaster. Read more about "How to recover loss in Forex trading"

Perfectionism

The paradox of perfectionism is that we want to make all the things impeccable, but this aim is not accessible. Can you imagine yourself studying numerous strategies, trying to predict losses at all costs, working yourself into a snip and still not being even close to the idealistic picture in your mind? If yes, congratulations, you are a perfectionist. Though you may use this quality for describing yourself at a job interview, in real life, it will not do you any good. It will wear you down and leave you drowning in self-blame.

Aim at better not best

Focus on the improvement, not on the things that you did wrong. Identify the strength that may help you to plan for the future. Stop being so critical in your self-talk. You would never reprimand people around in a way that you torture yourself. Stop with all the “you could have done better” and move to constructive thoughts. Do not point your anger about loss or less successful trade inward. Be kinder to the trader trapped inside your perfectionist mind. Your mantra can go like: “Ok, it was a mistake. I’ll review all my actions and plan how I can apply the knowledge to my future actions. You are a good trader, and we’ll become better together!”

Overtrading

‘Try and ‘feel’ the market, have more practice!’ – You read this regularly in books and hear in online seminars, form market experts and your fiancée who dreams of a world tour for which you’ll pay. You are persistent and success-driven pal, you can do it! Over and over you update the screens out of boredom or because you are emotionally aroused by the dreams of the upcoming wealth. After a while, you find yourself trading for the sake of it. Red-eyed, exhausted but fighting for your future – this is who you are. The risks you take are emotional; your actions in the markets are impulsive.

Discipline yourself

It is all about self-control and your ability to fight greed. Slow down, take a deep breath, visualize a big picture, and focus. If you still get too involved, keep a personal DON’T DO list that will stop you when you are lured into overtrading. Imagine that you can only have one vacation per year. We are pretty sure you’ll put all your creativity into the research for the places to visit, the most convenient ways to get there, and people to take with you on a journey. Now plan your trading to take only 40% of your workday. Over time you’ll see how the financial markets will fit into your life without taking over it. Your trades will be more well-planned and effective, the strategies you apply – innovative.

Frustration

Day trading can bring a lot of frustration. Losses, early closure of a position, market volatility – they all add to the boiling pot of your patience. This emotion naturally strikes those who are highly competitive, active and have a lot of achievements. You surely remember the growing feeling of outrage when an obstacle appears on the way to the long-awaited result. Frustration triggers anger that blocks all your cognitive functions, ability to calm down, and focus. However, it does not prevent you from taking action, and you do it. Now, imagine what kind of move you can make if it is not supported by any thoughts. It will surely be impulsive and can lead to the consequences you never desired.

Identify your triggers

You know yourself. Spend some time on looking back and trying to figure out what events made you feel an uncontrollable wave of anger and how these situations ended up. Most likely, you know the answer. The experience must have been disappointing and somewhat shameful. But since you know that losses, for example, irritate and make you a tiny evil person, then in case they occur, remind yourself about the cost of your anger. Once you identified the trigger, the relaxation stage should follow. It is difficult and needs practice, but this is how you grow over yourself. You make your mind calm down, breathe, and accept the situation. If you manage to do it just once, you’ll feel like a winner already because to fight your inner self is the most challenging task ever.

Great Job

It was quite a ride up and down with your neurons and behavioral patterns. We learned that trading is not for weaklings. But damn, you are amazing human beings with a strong will for success and desire to become better every day. Please, do not stop. Work on self-awareness inside and outside of your trading. Learn to see your mistakes in the market as lessons for future profit. Turn around your vulnerabilities and practice self-discipline.

We hope that our advice will simplify your daily trading, calm down your mind, and make room for hobbies and personal life.