The Importance Of Trading Psychology: When Reason Should Triumph Over Heart

When it comes to trading, many people make one and the same typical mistake: they act according to how they feel, not by logic. As a result, they lose money and quit the game. How to avoid it? Learn more about trading psychology!

What makes trading inefficient?

According to statistics, more than 90% of novice traders lose their deposit due to insecurity, fear, excessive hopes and excessive greed. Out of this audience, less than 10% replenish their balance again and continue to fight for their own interests and material well-being.
Here’s what drives the financial decisions of some traders:

  • Excessive self-confidence’
  • The propensity to tie yesterday’s conclusions to today’s decisions;
  • The tendency to avoid losses;
  • Fear of missing out (FOMO);
  • Greed.

Want to be a successful trader? Leave it all behind! The process of trading should boil down to a series of thought-through decisions based on financial analysis only – it’s not a place for anger, fear, or vehemence.

The rules of cold-blooded trading

To master trading psychology, you should follow a few simple rules.

After learning the basics of stock trading, exercise with demo accounts. Although contracts with conditional dollars do not cause the flow of emotions that arises when your “hard-earned” money is at risk, with a free trial, you can polish your trading skills to perfection.

Do not risk big money right away – a small deposit of $ 100-200 with good leverage will allow you to fully appreciate your own emotional preparedness for the inevitable exchange excitement.

If an open position obviously makes a profit, one should not fall into euphoria. Trading psychology is based on the formation of habits, both to losses and to gains. Better close the growing position and make a pause until tomorrow. If the contract is approaching the stop loss level, you should not panic – wait a bit.

The golden rule: Never invest what you cannot afford losing!

This is the main rule for any trader. Don’t have free funds? Then trading is not for you yet. If you invest the last penny, you won’t be patient and calm enough to wait for the golden opportunities. In panic, people close positions with minimal profit.

From the very beginning, try to treat bucks as ordinary numbers that should be subject to your calculation. Over time, you will learn to work with foreign currency assets and securities as with ordinary goods that you need to buy or sell at the right time.