Trend Technician

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Mastering psychology is easily as important as any other type of analysis involved in trading markets. There are two psychologies you need to be worried about, the markets and your own. Your own is much easier to read but can still be very hard to control.


Trading psychology is much easier to identify than to control. Many times when we’re trading we will decide that this particular case requires a different set of rules than the usual case. This is usually the first step towards a bad trade.

Ups and Downs

One of the first issues you will have to purge from your behavior is the mood swings that can come from trading. When you win you are a genius, when you lose you are a failure. Eventually, if you are going to be successful, you must learn to simply see wins and losses as inevitable parts of the process. Wins and losses have hundreds of different sources and your primary goal should always be to put the odds in your favor. You can make the right decision and still lose money or leave money on the table. You want to be a trader, not a gambler.

Getting Your Money Back

One of the most damning reactions to losing money is to try to “get it back.” Once again you must view losses as simply parts of the process. You will have losses. There’s no way around it. If you can be right even half the time, with good money management that can be enough to make a fortune. However if you let your losses destroy you in a desperate attempt to “win” every trade, you are doomed to turn minor losses into catastrophes.

Self Destruction

Another characteristic that plagues traders is the instinct to take a success and turn it into a loss. As people decide they are brilliant and have “beaten” the market, they start to take more risks and bend their rules. This is when they turn self-destructive and bring ruin on themselves. Just as you can’t let your losses destroy you, you can’t let your wins do so either.

The Rules

The key to successful trading is to develop your rules and then stick to them. You need to develop your own system and don’t let dreams of riches or fears of doom derail you. While it’s important to always be updating and tweaking your system, you mustn’t develop them in the middle of a trade. While your psychology can be difficult to master, once you have you need only start to try to identify the market’s psychology. Thus you’ve removed dangerous variables.

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