Psychology

Once you have a proven profitable strategy, the only thing that stops you is your psychology.

As humans, we want to control every single thing.

Trading is all about how to handle uncertainty and pressure. Most people can't. You want control… but you can't control the markets. You cannot control the outcome of the trade. In fact you cannot control the weather either. It is very difficult for someone who has succeeded consistently in other areas of their life, to enter a performance arena where you are going to be often wrong and there is nothing you can do about it. In trading, often the more you try to improve your win rate or become too selective, the worse a trader you become overall. The reality is that you are missing the point which is we play the odds game. We are not looking to be correct all the time.

A huge problem is that most people simply are unable to accept losses. When you enter a trade, you believe this trade will go to your target so it drives an emotional response which is painful if it does not go your way. In most areas of life, to lose is to be wrong which is a bad thing. And after being "wrong" one needs to problem-solve to make sure it doesn´t happen again, which means changing strategy. Beginner traders often internalise the problem of taking a loss and take it very personally become emotionally shaken and overwhelmed. They immediately try to fix the problem that the account has taken a loss and revenge trade.

During the trade itself, beginner traders are unable to ignore the "fight or flight" response of being attacked. Beginner traders don't know how to deal with the uncertainty of trading, so they make irrational decisions during the trade based on emotions. The survival brain kicks in and forces them to take action to avoid fear and pain. They are unable to even follow their own trading strategy due to the emotions the trading.

Emotions in trading hinder you in a big way. When under duress, people make emotional based decisions first based on fear and greed, not process based decisions. When I take a trade, it is extremely uncomfortable and it always will be. It is meant to be painful. But you cannot make decisions based on emotions, and you MUST find a way to control the pain experienced during trading. In fact the biggest ability to be a good trader… is the ability to take pain, to be able to handle pressure and emotions. You just have to accept the outcome of the trade and that you cannot be right all the time. You need to be calm in the face of uncertainty and give up some control of the outcome. The more you can learn to let go and surrender to your strategy, to taking both wins and losses, the better trader you will be.. its almost a state of vulnerability.

Actually you need to make, reset and create new brain pathways to think differently. Because actually the goal of trading is not to avoid taking losses, it’s to play the odds game and become better emotionally when you take a loss that is according to your strategy. You must not care about the outcome of a trade become process-based and not outcome-based. You need to know how to remove emotions and follow a probability model over a larger number of trades.

Professional traders create a trading approach from a simple framework, based only around keeping things simple and controlling risk to enable them to execute perfectly.  It might be a complex strategy with many nuances, but it is reduced to its most basic form for execution purposes in the live market. In trading simplicity works...why?...because you need to beable remove the possibility that emotions enter your trading.

90% of the problems are due to the fact that you are focused on making money, rather than building good trading habits. Abandon all expectations when you trade. It doesn’t matter if the next trade wins or loses. Success feels effortless when you trade each day with no intensions...the trade comes to you, it either wins or loses. You see losses as a business expense, and just stick to your strategy. Once you do this, you trade relaxed and confidently and without fear. If you can think process-based and follow your strategy, and ignore all emotions.. congratulations you have crossed over the threshold from being losing retail trader to professional trader. The focus of any trader is to minimise your performance discrepancy as much as possible. Your trading success each day should be seen in terms of.. did I follow my strategy? rather than whether the trade won or lost.

Trading Psychology