Blurt Trading Academy Season 1 Week 2 (Intermediate Course): Trading Psychology Part 1

What Is Trading Psychology

In trading most times psychology is sometimes been overlooked but it actually forms an integral part of any professional traders skill set. The range of emotions which traders experience which affects their interaction in the market could be known as trading psychology. For one to be successful while trading then it is crucial to identify certain emotions like greed, anger, happiness etc yes as a trader it is vital to identify our state of mind before trading and understand the fact that our emotions can impact our actions while trading. It is of great importance that we understand that both positive and negative emotions can affect our actions while trading yes positive emotions like over-condidence could make us wreck our trading account and negative emotions like fear could hinder us from entering a trade even though there is a clear sign on the chart that it will play out, so in effects that is while it is vital that we keep our emotions in checks before trading.

No matter how trained and expert we are in reading charts and technical analysis if our emotions are not put in checks we could be headed straight to disaster so it is important to check how we are feeling before we start trading because trading psychology does not just focus on the emotion we experience during our trades but could involve also on our overall mental state.

Trading psychology is not just about or simply just handling our fear and greed no not at all not just that but it also entails more on our self-balance of the situation we are in our environments, our lives. Trading psychology is simply the emotions and the mental state which helps to dictate success or failure while trading. Yes this psychology is important in determining our success just like knowledge, experience and skills because if we have all the knowledge and skill set in the world bundled with loads of experience and yet fail to discipline ourselves or master our mindset and emotions then we will find it hard to succeed in trading, yes granted we could win some trades but we can't remain profitable on a consistent basis and trading is all about consistency.

Explain 3 Emotions Which Occur In Trading

Well in the course of trading they are strings of emotions which a trader often experience which actually impact his trading actions most times negatively

Fear:

well fear is one of the most common emotions which traders often face and it's actually a negative emotion which often paralyzes or hold a trader back from entering a trade out of fear of being wrong. In trading there are so many fears that are mostly common which often holds a trader back, one of such is what we know as FOMO which is the fear of missing out sometimes a trader enters a trade after a coin has made parabolic runs and even though by logic it's only normal to expect some reversals before continuation or even a huge dump one simply because of the fear not to miss out jumps into a trade which most often times leads to huge loss.

Or it could also be a trader who have carefully analysed a trade and has targets and also has strong indication of that trend continuing but out of fear he quickly takes profit even when not one of his targets has been met but out of fear that if he leaves it his profit could turn to a loss he quickly close the position with little when it was a trade that could have generated massive profits.

Sometimes too the fear comes in this aspect the trader after carrying out his analysis he refuses to take the trade because he is afraid of being wrong, yes he allows this negative emotion fear to cripple him thereby making him doubt his analysis that's what fear can do to a trader so for one i believe that in order for us to be profitable in trading the it is of utmost importance that will control our fear and not allow it to alter with our trades that's the only way we could be successful

Euphoria:

This is another trading emotion which could cost a trader dearly if not put in check, yes euphoria is a positive feeling which is actually a state of extreme joy or happiness probably due to the fact that things are moving in the direction a trader expects or overtime it seems a trader calls have all been accurate and it seems he is the master of the market at this point a trader could then become euphoric.

When a trader become euphoric he allows himself to feel that since he has been able to perfectly analyse the market in consecutive times then he is the perfect trader and can't make mistake, that idea there will lead him in making mistakes and possibly ignoring warning signs because he believes that nothing can go wrong after all he has a perfect record and knows what he is doing which could often lead to a trader becoming over-condidence which no doubt will be his pitfall because past performance doesn't necessarily guarantee future success.

When a trader is euphoric he becomes over-condidence, he may even forsake his plans that is his trading plans and even take more risk than he would ordinarily take just because he feels that such a trend must continue now this could lead in losing his trading account so therefore it's vital that as traders will try not to let excitement or joy of winning a few trades get in our head and affect our mind set which we impact negatively on our trading actions.

Greed:

Greed is a negative emotion and this is a feeling that almost all traders at one point do experience, never being satisfied with profits. Some traders refuse to take profits even after their price targets has been met sometimes because they believe the market should continue going up just out of a place of simply wanting to make more profit they refused to lock in profits when they should and it could lead to loss when the market reverses against them wiping out even what little profit they have made.

Sometimes also because of greed when a trader is in a winning trade instead of taking profits the trader even adds more capital to his trades with the hope it will fetch him more bigger returns and tries to even will the market in the direction he wants and we know this things do not always end well because the market does not care about what will want it simply does what it wants and as traders will take advantage of its market by leaving emotions behind, a greedy trader runs the risk of incurring more loss in the market even when he is in losing trade instead of exiting on time he believes the market will move in his direction or even double down by adding more money with the hope it will help his trade.

Whichever the case i believe traders must keep greedy attitude behind in other to succeed because some expect so much huge returns i mean unreasonable amount from one trade some will even want to change their lives in just a few months of trading which ofcourse will lead in loses upon loses because trading is not just some money-doubling scheme an any greedy approach will sure lead to us blowing up our account.

My Plan On Building A Good Trading Psychology

Well first of i need to understand the fact that trading is mostly about psychology then being able to trade whilst developing a consistent strategy. We are in a violtile market and sometimes could have moves in the upward or downward direction for one when the market is moving parabolic i should maintain a balance state of mind without feeling pressured to have to FOMO in on such trade simply because of large movement in price being afraid of missing out that is a bad trading psychology.

Also i should be careful not to allow winning trades to make me become euphoric almost to the point we become over-condidence and then that is when one is likely to slip up and before we know it we end up giving up the profits we have made or even more we certainly don't want to be giving back our profit after a successful day. And also i need to be aware that loses are normal even the most skilled trader sometimes loses money so as such i shouldn't allow myself to be fustrated after a losing trade that i almost want to jump back in to recover my loses more like a revenge that never ends well instead after a losing trade one could step back take a break and then take advantage of the next good trading opportunity that is vital to our psychology in trading because if we rush in to take another trade after suffering a loss then there is a very good chance of us losing again.

Another thing that i could do also to build my trading psychology is not to over-trade losing or winning trades could make one to start over-trading the thing is the market is open 24/7 so i shouldn't feel like if i don't take this trade now then that's it no not at all learning not to over-trade could actually be a key to success. Over-trading is one of the reasons why most traders fail and that is why most experienced traders never succeed because they over trade i should remember when it comes to my trading psychology i need to maintain a balance view and state of mind and to be humble, focused, grounded and patient and have some trust in ourselves and the process letting go of needless emotions that is how to build my trading psychology.

Also i shouldn't feel that trading is a game or maybe that am just playing around forgetting that this is real and that any slipup what am losing is real money and not audio money some traders do forget that i shouldn't, i should also understand the fact markets don't and won't always move in one direction no not at all but it's subject to up and side and sometimes even ranging movement which is vital and key to a trading psychology, no one i out to get you is just us doing our thing so we need to be smart and patient.

A Simple Trading Strategy And How I Plan To Achieve It

Well to develop a good trading strategy it often involves a lot of things like for starters i need to assess myself if am really ready to take this step and as well as making sure am mentally prepared because jumping into trading without checking our mind set is a bad trading strategy that is why i need to make sure that before i start trading i need to check my mental readiness if am rearing to go if am confident or simply just want to go and make money to help my situation in life.

I should also make sure to always have a risk level i am not willing to exceed no matter what and how much of my trading capital which am willing to risk in a trade i should ensure that the amount am using to open a position for a day should be one that even if i lose won't impact much on my total balance that is why i think i will go for the 1-2% risk ratio in other not to blow up my trading account with a single trade.

Also from each possible trade i need to have what i plan on achieving on such trade the profit i aspire for and the how much lose am willing to take incase the trade goes against me i need to develop a good risk/reward ratio and for me i feel my risk/reward ratio should not be less than 1:2 ifnot it's not worth it, i should always have an exit price in mind i mean when in a position i should always have a proper stop loss and take profit which i should set manually when opening the position and it should be in accordance with my risk to reward ratio and from time to time i should sit back and check my overall performance and see if there is anywhere i could make adjustments to better my trading life or if i should simply stop trading.

Now in other to achieve this goal i have to be determined yes one thing is to set a trading strategy another thing is to actually follow it, so i need to discipline myself not to allow the noise in the market make me alter my trading strategy but to follow it to the last comes what may, after setting a good trading strategy i should instead work on improving it not abandoning it infact whenever we want to let go of our trading plan that is when we need to stick to it the most because he who doesn't have plan or doesn't follow one then the market will set one for us and it will always lead to huge loss. So to follow my trading strategy it requires a certain amount of dedication and self-discipline.

Conclusion

Indeed this lesson is crucial for one hoping to develop himself as a good trader that is why i grateful for this lesson prof @venom-21 it is timely and i have seen the need why we need to keep our emotions in check when trading because that is simply the only to succeed in trading, no matter how much trading skills we possess or how good we are in reading charts if we don't keep our emotions in check overtime we will always remain in loss