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Trading Psychology

Master your mindset when navigating through the financial markets.

A lot has been said about why patience and discipline are crucial elements in the success of a trader, as well as a consistent trading strategy. The question to ask yourself though is how?


We all know that emotions affect our trading decisions. The key to mastering the two ingredients would be to primarily organise the market analysis process into sequential steps that would engage both:

  • The RIGHT side of your brain (Emotional, Creative, Imaginative)
  • And the LEFT side (Logical, focused on facts, Math orientated)

As a trader you need to understand that the success of your trades are not dependent on a single trade, so stick to your system. Human psychology includes thoughts and feelings that can negatively affect our trading decisions. Emotions such as:

  • FEAR
  • EGO

These feelings are particularly popular amongst new traders being overwhelmed by fear. Therefore managing these feelings is parallel to successful trading. The success of your trades can be broken down and attributed to


As we can see from the numbers above, no matter how strong your trading strategy is, if your psychology affects your trading decisions, you may experience lower success levels.

Having mentioned the emotions factor above, as well as the importance of trading psychology in your journey as a trader.

The two main emotions you are most likely to experience are:

  • FEAR

These emotions can cause you to deviate from your plan.

Greed makes you try and squeeze more profits out of a single trade than your plan accounted for. By doing this your trade will not close at the predetermined profit level allowing the possibility for the price to retract back to your entry point or lower.

An example of FEAR would be if you closed a trade before your target profit - whilst you are only a few pips in profit - because you fear that your trade will reverse and leave you with a loss.

EGO is also another factor to consider. Some traders always want to be right, which is where EGO becomes a factor. So if your trade moves in the wrong direction, you may not want to close the trade because that proves that you have made a wrong decision. Therefore being forced to close at a loss might cause you to deviate from your trading plan in an effort to get your money back. This behaviour is called REVENGE TRADING.

Therefore a traders success depends on discipline and following their trading system. A strategy with a 100% winning ratio is unrealistic and you must be prepared to take some loses.

To minimise the effects of your emotions:

  1. Practise with a demo account
  2. Trade with a tested strategy
  3. Be prepared by researching and reviewing analysis
  4. Accept the risk

Controlling emotions is vital to your success.

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