Trade Psychology

Trading psychology is intimately related to trend psychology; trend followers. The first pitfall is to follow others! The most important elements are as following:

When you do trade you need to be patient. You need to observe and think. The number one error is jumping into something to quick. Take your time and do nothing before you feel comfortable. At the same time you cannot sit there and wait forever. You need to follow your objective, meaning that you need to know what you are waiting for. If you are patiently waiting for something you do not know what is, you might miss the thing you are waiting for. So, decide for what you are waiting for. Make yourself a methodology that includes both patient and action indicators.

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Be mindful. Mindfulness is perhaps the most difficult topic since our life is filled with distractions and interruptions. To stop, think and feel might be almost impossible to complete. Still this is one of the most important tasks in business and trading. To be aware of how you feel to know when the emotions are playing with you are a major task. One of the main errors is emotionally based and not decision based. This means that the problem is not a result of you thinking, but rather a result of you deciding based on an emotion. Emotions cannot run a business. Slow down and be mindful.

Be honest with yourself. We all think that we are honest with our self, but NO! Very often we mentally convinced about something, we see a pattern in the trade. Here we need to be awake. Nothing follows a pattern. Perhaps we might see traces of a pattern in the trade, but nothing follows a pattern. We need to be honest with ourselves and admit this simple fact. We need to know what we might expect in the trade, and understand the risk involved with trade.

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To become good in trade is not a quick affair, but it is an important affair. Focus and you will get closer to surviving in trade.

I wrote an article last year about this topic on ChinPsy: Click here for the article

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