Psychology of Trading

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For obvious reasons, beginners prioritize technical knowledge about trading strategies, entry points, indicators, trading robots and other patterns, completely forgetting that trading, first of all, is a process of one’s own activity: from the attitude to the market situation (what we were looking for and how similar it is to what we are looking for) to making a decision when the broker has already given an order to make a deal. You can often hear accusations like “this is a bad strategy (robot, indicator, book, etc.)” instead of common sense analysis like “in this case I was in a hurry and overlooked the stochastic indicator readings”.

Our team of professionals unanimously asserted and continues to assert that trading is a profession in which personal qualities (attention, diligence, scrupulousness, responsibility and discipline) and technical knowledge (fundamental and technical analysis, trading strategies, money and risk management, etc.) are inextricably linked and correlated. -management, etc.). And since this is the case, trading psychology is one of the most important components to learn and apply!

In trading psychology, there are several stages in which your psycho-emotional state as a trader will have different indicators, and therefore different methods of influence.

In this article we will try to consider in detail the circumstances, causes, but most importantly – methods of regulating this very psycho-emotional state, so that it has a positive impact on all your work, and therefore on the profit, to which we all aspire!

The logic of the trade cycle is as follows:

Trade planning (making a trading plan, checklist of signals) —> 2. Market analysis, identification of a trading signal —> 3. Decision making and transaction support —> 3. Analyzing your own actions, identifying mistakes —> 1.

At the same time, we know for a fact that most people (except you, of course, dear reader) completely miss 3 out of 4 listed points in trading. The only point of this cycle that is not ignored is making decisions almost at random. We all know what such trading leads to – we all know, of course – to loss of deposit.

We strongly recommend you to implement all 4 points – it is this approach that will allow you to systematically increase positive results, and thus increase your trader’s earnings!

Preparation for trading

Before proceeding directly to the enumeration of individual actions, it is necessary to pay attention to the fact that all our actions are always accompanied by certain circumstances: from lighting, smells, furnishings, to our clothes and the actions we have performed before. The importance of organizing comfortable working conditions can hardly be overestimated!

We strongly recommend paying attention to such aspects as:

  • Time of day – choose according to your activity periods, and trade instruments accordingly.
  • Location – try to stay in the same place during all trading activities (room, study, office, etc.). This is especially important in the moments of trade planning (so that nobody and nothing distracts you and prevents you from concentrating) and decision making (actually trading).
  • Clothing is a kind of fetish, but it will be right if you do not wear this thing(s) anywhere else. If you want, it will be a kind of talisman.
  • Music – to your taste, but, obligatory condition – no longer include it as an accompaniment to any activity: neither when driving a car, nor when playing sports, nor when putting your house in order, etc.

This list could be supplemented with other details accompanying the concept of “comfort”, but, believe me, it will be quite enough if you stick to these four. In psychology, this is called “anchoring.” With the circumstances that systematically accompany the activity, the reactions of the organism up to the development of a reflex are associated.

 Everyone remembers from the school course experience with a dog and a light bulb, which was lit simultaneously with the issuance of a portion of food. So, in the future, every time the light bulb was lit, the dog secreted gastric juice. The same logic in the recommended approach – to trigger certain brain resources (certain memory zones, reasoning and decision-making logic) – you need to create certain identical circumstances. Then the brain will quickly adjust to the trade, which will certainly have a positive effect on the results!

Trade planning

No matter what strategy and tool you use, what broker you work with, what your deposit is, etc., you should have a trading plan for the day!

Bad news. “Now I’m going to plop down a couple hundred bucks and that’s it for today” is not a trading plan.

The good news is that you can make a trading plan anywhere and any way you want, but it must be tangible (written on electronic or paper) and answer the following questions:

What instruments do I trade with today?

Justification taking into account the requirements of the trading strategy. 2-3 tickers selected in the course of preliminary analysis are enough.

Are checklists of entry points compiled?

 It is obligatory to make a list of conditions for opening positions (for each TS is different), the volume of the trade, including for each subsequent one after the negative one; stop order levels.

We study the most effective strategies on webinars.

Profit or loss limits. They allow you not to fall into euphoria or the desire to “get even”.

Analyzing the market, determining the trading signal

Traders call this period “sitting on the fence”. In trading, a special danger is the desire to make a deal now, for fear of missing a chance. In such a hurry, novice (and not so novice) traders often “pull the owl over the globe”, adjusting the actual to the desired. And this is where the previously made check-list will help! The more precisely the conditions for entering the market are formulated, the more erroneous trades you will eliminate, saving yourself from losses.

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