Trading Psychology

Best Trading Psychology Course Online

What is trading Psychology

Trading and investing involve analyzing market data and making decisions based on that information. However, what sets successful traders apart is their ability to manage their emotions. The psychological aspect of trading, including managing nerves and controlling reactions to losses, can be a significant challenge even for experienced traders. While it is not possible to completely eliminate emotional influence, it is possible to learn to control it to minimize its impact on trading performance. In short, psychology plays a crucial role in determining the success of a trader and managing emotions is a key part of the trading process.

Psychological Trading mistakes

The mistake many beginners make is to assume that by developing technical and fundamental analysis skills they will be successful. This is only part of it, but learning to control emotions is the most important skill for being a successful trader. Why? Simply because emotions have the greatest impact on results. This is because people do not always behave logically. We are often influenced by emotions and act differently. A person’s psychology is made up of thoughts and feelings that influence the way they act, therefore, psychology shapes behaviour in every aspect of life, including trading.

A successful trader must stick to the rules of his strategy and not let emotions get in the way, causing him to break the rules he has set for himself.

This means that the trader must be very disciplined to stick to his strategy, even during a losing streak.

Dr. Van Tharp is famous for dividing the trading process into three categories according to their importance:

  • Trading strategy (10%)
  • Money management (30%)
  • Psychology (60%)

According to him, the psychological aspect of a person and the way they think about trading is the most important factor for success. Since we cannot know what other market participants will do, the only thing we should focus on is what we can control, i.e. our emotions and what we will do ourselves.

Trading strategy is ranked as the least important according to Dr. Tharp because, regardless of how successful a strategy is, psychology is the key to success.

What we must come to as traders is to think clearly and not be guided by emotions. This means, at that point, the trader has control over your behaviour. We must not forget that emotions can determine the course of our trading.