Trading Psychology

Best Trading Psychology Course Online

What is trading Psychology

All traders and investors see the same prices, read the same news and analyse the same charts, but what makes some profitable and others not? The answer: emotions. They affect, usually negatively, the results of trades.

That is why the biggest challenge a trader faces, even if he has a lot of experience, is the psychological part: controlling nerves, anxiety, the reaction of his mind to losses, etc. Emotions cannot be avoided (and can lead to not making objective decisions), but they can be controlled so that they do not affect a trader’s performance.

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.