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How to develop a good trading psychology


How to develop a good trading psychology


Trading is a big industry these days whether that be for the foreign exchange markets, stocks, bonds or commodities the point is that there is plenty of money to be made from these markets, but not everyone has the right mindset to be able to do it. It is an elite occupation with the people who take part have extreme focus and lightning fast reactions, some might even call them superhuman, but that couldn’t be further from the truth, they simply have the right mindset and trading psychology.

Trading psychology should occupy a large portion of someone’s trading plan because it counts for a large part of whether a trader is successful or not. In fact some of the most successful retail traders would argue that it is the most important part of a trading strategy. A perfect example of why having the right mindset is important is when you place a trade and not long into it, the trade starts to turn south and head into negative figures. Now for someone who has just started it will be a very nerve wracking experience, because for the first time they are trading with live trading account. However for the more experienced traders they know exactly what to do, which is to stay calm and have faith in your analysis.

Experienced traders will leave emotion at the door and act like robots during their trading day, because when it comes to trading there is no place for emotion as it can interfere and often cause a trader to lose confidence and withdraw from a winning trade. As opposed to withdrawing from a trade too early, an inexperienced trader who doesn’t have a good mindset and doesn’t have the required knowledge to navigate the financial markets, will often hold onto trades for too long and insist that the market will correct itself. Unfortunately for us veteran traders, we know that is not always the case, and without proper money management you can end up getting wiped out and have your account.


Something that can help improve or even develop a winning trading psychology is to create a trading journal, and every time you take a trade that is based on your analysis, you would write it down and include details such as your entry, take profit and stop loss. Making detailed notes like this is a very good way of being able to review your progress in an attempt to find out where you went wrong on previous trades.


Another crucial part of developing a strong trading psychology is to accept that you are not going to win every single trade. Not even the professionals have the capacity to win every single trade, but because they have the right mindset they are able to forget about the loss and move onto the next trade when it comes. Losses are all part of the job and if you cannot accept the fact that you can lose then this isn’t the job for you