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Psychology and discipline in trading

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Emotions of the Trader

All people experience emotions, especially when their money and financial independence are at stake. Greed, fear, hope, excitement, euphoria, thirst for revenge are the most frequent emotions of any trader and his worst enemies.

Yes, psychology is the most difficult aspect in a trader’s work. Even experienced traders can fail because they can not cope with their feelings. This is one of the most undervalued factors of a trader’s failure, very few people work on themselves and temper their mentality.

In this article, we will describe the main nuances and important components of psychology and discipline in trading, and also define how to deal with your emotions and defeat them.

Greed of the Trader

The description of the problem: greed is the first and one of the strongest vices of both traders and ordinary people. In Forex, it manifests itself in different ways: to break the jackpot and preferably quickly, to take as many points in each transaction as possible, to disperse the deposit, etc.

The main victims: beginners and lazy. Greed is most common to traders with little trading experience and lazy people. The first fall on the bait of brokers, who at every corner promise you a sweet life and complete financial independence. The second is those traders who do not want to spend their life to learn how to trade, but want to “light” to cut the dough.

The result: a thirst for quick profit leads to a severe violation of the risk management and any other adequate rules of trade, which ultimately ends with a deposit sink!

How to fight: you must forget about overstating the risks, dispersing the deposit, quick enrichment. Trading is hard and painstaking work, you can never become a good trader and you will not earn money on Forex. Do not break the risk management, do not pursue “easy” money and tune in to hard work, then you will succeed!

Fear of the Trader

The description of the problem: the fear of opening a deal, the fear that a profitable transaction will unfold and you will get a stop, as a consequence, an unjustified exit from the position, a fear of losing your money, a fear of making a bad trade or missing a profitable, etc .. Fear is a very strong emotion that presses on our psyche and forces us to do stupid things.

The main victims: both beginners and experienced traders. In novices, fear is more often manifested in fear of opening deals and losing money, with more experienced traders, fear manifests as a fear of allowing a losing deal or missing a profitable deal. Very often after the rollback, fear of reversal and loss of profits begin to prevail, or even stop loss.

As you can see, fear awaits at all stages of becoming a trader.

The result: unreasonable closing of transactions, as a result of loss of profits, violation of the trading system and plan, fear of trading, as a result many good deals are missed, and when you have managed to overcome this fear, usually you start entering into any deals, which makes your deposit hurts!

How to fight: before making a deposit, determine the amount, the loss of which will not affect your welfare critically and will not affect your family and normal life. After you have decided on the amount, mentally “bury” it. Imagine that you have already lost it. This will relieve the fear of losing money.

Also do not be afraid to get a stop loss. This is part of the job. Treat this as a routine. If you have received several stops in a row, it is better to take a short pause and relax from trading, to take a breath.

Strictly adhere to its trading strategy and trade plan: there is an entrance – enter, there is no entrance – wait. You see a reversal signal in relation to your open position – go out, no signal – sit in the deal.

Do not try to take all the transactions, remember, you will never get to take all 100% of profitable trades and all the traffic. Work strictly on your system, only so you can understand whether it works or not.

Hope of the Trader

The description of the problem: the hope for success, the hope that this transaction will be 100% plus, that the price will unfold and we will not get a stop or we will leave the drawdown, hope not for the error of the trading system or the trading plan.

Trading is not a place for empty and unreasonable hopes. In addition, in order to believe in yourself, you still have a lot to learn, practice and work on mistakes. Relying on luck is stupid, because it is not eternal, and the market does not forgive frivolity.

But the most severe and cruel manifestation of blind hope is the belief of a trader who holds a huge drawdown, that now the price will just turn around and I will earn. I have repeatedly met such situations, in most cases the outcome is sad.

It is possible to add locks here, which traders bet in the hope that the price will again go in their direction, they will open the locks and their initial position will bring them profit.

The main victims: newcomers and “plumbers.” Due to lack of experience, many traders hope that newcomers are lucky. If u are lucky, it is usually for the time being. “The creamers” blindly believe that now everything will turn out exactly, while they do not do work on the mistakes at all.

The result: stress. When our hopes do not come true, when in spite of all prayers we lose money, panic surrounds us and we are stressed. This is especially evident when you hold a huge drawdown or when you have a lock hanging, and the price has already left hundreds of points from the place of the loka.

Stress, in turn, affects not only the mental state, but also the physical. You start to make wrong trading decisions, further exacerbating your situation, increasing the risks with the hope that now it will definitely go down!

How to fight: forget about empty hopes, trading is governed by cold-bloodedness and prudence. No prayer will help you, only a sober mind, a clear trading system and a trading plan.

Do not overstep the drawdowns and do not use locks, if all 1000% are not sure that you can then get off well. Be sure to use stops!

Do not overestimate the risks, hoping that the next deal will be 100% in positive territory. On Forex, nothing happens at 100%. Therefore, strictly adhere to your risk management.

Passion of the Trader

The description of the problem: the desire to always be in the market, in all transactions, trade for the sake of buzz and satisfaction of desires.

Excitement is a very underrated, but cunning enemy. He encourages the trader to be constantly in the market, open a large number of orders and play, play, play. Such traders do not look for good deals, do not spend a lot of time analyzing and analyzing the market, they go wherever you can and can not go, as a result, the number of really good deals is small, but there are many stops or small profits.

For such a trader, forex is like a slot machine, a toy in which you can fool around, and only then as a business.

The main victims: traders with experience from 6 months to 2-3 years. Most often, excitement is manifested in traders who have already gained a little experience, confidence, but because of the lack of a really working algorithm or trading strategy, try to find a deal everywhere and go.

Very often it manifests itself in the form of a chase after a train, when the trader seeing that the price has moved very strongly in some direction, is trying to have time to enter the position. Basically, it turns out to be done at extremes, at a disadvantageous price, which negatively affects the result of trading.

The result: a large number of substandard transactions, which leads to losses and loss of deposit. A large number of simultaneously open transactions, as a consequence, violation of the rules of risk management and loss of money.

How to fight: Do not try to find a deal where it does not exist. Learn to wait for good and quality deals. The emphasis is on quality, not quantity.

Be objective in the analysis of the market, do not try to “finish” what is not there, so that the transaction is consistent with the parameters. The deal does not fit the criteria of your trading system – you do not go into it.

Do not go into a large number of transactions simultaneously, especially on correlating instruments. Let it be 2-3 deals with your usual risk, but on tools that are not related.

Euphoria of the Trader

The description of the problem: when several deals in a row go into a plus, the trader begins to consider himself a trading god and begins to overstate the risks and enter into not very high-quality deals.

It is quite natural for everyone to “forge the iron while it’s hot.” Indeed, there are situations when fortune is on your side and you just “bend the market as you want.” To use these periods for 100% is quite normal. BUT, do not try to use the moment at 100500%.

Euphoria goes hand in hand with excitement and often it is it that causes the trader’s desire to constantly be in the market.

Very often during such a fart, the trader begins to overstate the risks, believing in his luck and wanting to cut more dough. At the same time, low-quality deals appear, because you are lucky, so all your transactions MUST come in plus.

This is where the main problem lies, the market does not owe anyone and is very volatile. Today you are lucky, tomorrow you merge again and again.

The main victims: newcomers and typical “plumbers”, who in the course of the century began to fart. The situation is this: you just came to the market / started to earn a little and decide that, you finally have a lucky smile (for beginners this is the feeling that it’s easy to make money on the forex) and now you will definitely break the jackpot.

The desire to profit + excitement adds oil to the fire, and now our successful trader is struggling to break the jackpot / repel the lost money from the market.

The result: Since trading is not an easy business, even during very successful periods there are falls. A few such stops on the increased volume can greatly impair your result. In the end, during a favorable period, you earn less than you should, or even completely lose.

How to fight: the recipe is simple – strict management risk. The risk should be proportional to your deposit. Do not try to take all the transactions, choose only the best quality and corresponding to your trading system.

It is patience and discipline that can protect you from adverse consequences.

The Thirst for Revenge or I’ll Play It All Now

The description of the problem: the trader has lost a decent amount and now wants to return everything, recoup from the market and avenge his nerves, time and effort.

The thirst for revenge of a trader is one of the most common mistakes in trading.

On emotions, you are trying to quickly get back what the market took from you, to punish him. You go into the first deal you got, the increased volume in the hope that now you will win, you will return everything and earn more from the top. After all, it can not be that would constantly lose and merge, luck will surely smile to you and now just that moment.

This is the most obvious expression of the trader’s emotions and one of the most pernicious.

The main victims: traders of almost any skill. As in all other cases, the main risk group is newcomers and inexperienced traders. But even experienced traders have a desire to recoup and return their own. Therefore, absolutely every trader is in the risk zone of this emotional problem. After all, no one likes to lose their money, so anyway, but such thoughts slip in everyone’s mind.

The result: in 99% of cases the result is one – more drawdown, loss, drainage, sorrow (suitable to emphasize).

The trader on emotions after an unsuccessful deal comes in the first more or less (in his opinion) normal deal. But under the influence of strong emotions, the opportunity to reason and to make informed decisions is lost, so most often such transactions are substandard. As a result,% of profitable transactions among them is negligible.

Moreover, it is necessary not only to win back, but also to earn. As a result – high risks and even greater drawdown, loss, sink, grief (well, you understand).

How to fight: never and under no circumstances try to immediately recoup! In general, forget this word! You must be cool and balanced. No deals for emotion. If you can not cope with them, it’s better to step away from the computer and go for a walk, calm down.

When you come to, then only you can start analyzing the error, the market and the search for new good deals.

Patience and composure should become your second self. Your deposit will be grateful to you.

Discipline in Trading

One of the fundamental things in trading is discipline. It is she who keeps you from all the above mistakes. Only thanks to it you can get rid of problems with psychology.

Discipline is directly proportional to professionalism. This is the most important difference of a successful trader from a creamer.

Basic principles of discipline:

  1. Always stick to your trading plan and trading strategy;
  2. Observe the rules of risk management in any situation;
  3. Always keep yourself in hand, be cool, avoid psychological mistakes;
  4. Do not allow typical mistakes of the trader and work on their elimination;
  5. Work on your mistakes and constantly strive for better results;

These simple, at first glance, things will help increase your efficiency, profitability and increase your qualifications as a trader.

In the comments write the most frequent psychological mistakes that you had to deal with!


If you have suggestions, what else can you add to the list of psychological problems in trading or interesting observations related to this, write to me in Skype – vovkfx, I will gladly add them to the article.

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