The Secret of Trading Career
Trading psychology is not new for traders. We could always learn technical analysis or market knowledge by reading and practising. But most traders still couldn’t profit constantly when they have enough trading knowledge. Why do so many traders fail to make money? Only 10% of them are making a profit. One reason for this data would be highly related to trading psychology: Most traders are bad at dealing with their emotions, or to say, weaknesses from humanity.
To be a professional trader, apart from some hard skills to learn, it’s necessary to be an expert on trading psychology as well. Often on this psychological journey of a trader, every successful one has a 3-stage experience: See it, face it, sort it. To see and understand the overall trading psychology is only the first step to further a trading career. To face it objectively is the second more important stage. And there will be nowhere to go till one trader has a final methodology to sort it.
The Psychological Journey
4 Psychological Trading Factors
I found out through my own journey that one of the main reasons to destroy a trading career is the time factor. People just seem to be in a hurry to make big money, especially in the FX industry when free deposit and high leverage is advertised everywhere. And once when traders start to make a bit profit, they go into frenzy to make more. They want to believe that they will become millionaires overnight.
This is "greed" and believe me, despite what Gordon Gekko said, greed is NOT good for a trader.
And when these same people are not making any money, or worse, when they are losing some of their precious capital, they suddenly panic and start doing all sorts of silly things, such as trading bigger size lots, moving stop losses or targets, or not having a stop loss or target in place at all. Sometimes they are even scared to take another trade. Fear follows up closely after greed, and fear is not good for a trader either.
The other two trading psychological factors in a trading career to be avoided at all costs are over confidence and hope. Wishful thinking. Everybody hopes their trades will go the right way. However, depending too much on a fingers-crossed approach is not sensible and can only end in tears. I was once sitting next to a trader who suddenly started to pray. Eyes shut. Hands in pray position. I am not joking. I couldn’t believe it. This is NOT the way to make money…
As a professional trader, you will never base your trading decisions on wishful thinking. If you do so, you will only blow out several trading accounts. And as a professional trader you don't want to get "a margin call".
Greed, fear, over confidence and hope can make your trading a total disaster. However, they are the psychological journey that every trader has tasted, and will constantly have to deal with throughout their whole trading career. You will need to avoid all four to be a successful trader.
The Secret to Trading
To be successful in this line of work, what you need to do is to anticipate, to read the emotions of others in response to movements in the market. It is absolutely vital. This is the secret.
Of course, we are human beings, and as such we all experience feelings and emotions. We all have hopes and fears. The psychological barriers would be too much for anybody to handle. We are not machines or robots.
So, how do we do that?
Well, by having a trading plan. All professional traders MUST have a plan. And there should be no exception to that. There is no way to make your trading career successful without one. This is what I insist on my own trading and where a sustainable profit comes from.
What I want to do here is to give an insight into the psychology of a trader. It will give you a glimpse of what a trader should do and what should be avoided in order to become successful traders. And I would like to share more with other prop traders regarding to some other trading issues in my following blogs.