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Trader Psychology

Trader Psychology

A healthy and sharp "trader's mentality" is the most important tool in the challenging task of surviving and winning in the financial markets. There are several reasons for this:

Human emotions, thoughts, and behaviors drive financial markets. Successful traders know how to exploit these basic human traits and profit from them in a consistent, disciplined manner.
Unfortunately, what creates the profits for successful traders is exactly the same thing that breaks most beginning traders. It's the same market for all. The difference is that novices do not apply healthy thoughts, emotions, habits, or behaviors in their trading. This is the difference between winning or losing in the long run.
The market is not a villain whose purpose is to break the majority. On the contrary, the market provides endless opportunity for wealth. Whether we tap into this wealth or is personal choice and is a function of preparation, attitude, and behavior. Thus, we are totally responsible for our trading results.
When we feel negative emotions such as fear, greed, anger, fatigue, anxiety, and laziness, we will be inclined to lose.
If we cultivate positive energies, such as humility, confidence, respect, trust, patience, faith, and well-being, we will be inclined to win.
Successful traders learn to flow with the market, adopting positive attitudes, expectations, postures, and behaviors.
Novices attack the market first with greed and then with fear. Once again, it's the same market for all. The difference is that successful traders make money because they are healthy and happy, not the other way around.
An emotion generally considered positive, but proven to be lethal in the financial market, is hope. When a trade begins to lose, novices tend to hold on in the hope that eventually it will become a winner. Hope makes us feel good, even when our money is being drained away. You can believe that a small loss will become a huge one when it is fed with a large dose of hope.
We humans have an ego which compels us to justify our own reason. We always want to be right, even when we are dead wrong.
The market has its own reason, which is dry, rational, and mathematical. It does not care about our personal need to be right. To profit from the market, we must follow its reason without question. This is very difficult for most beginners to accept.
Being right in the financial markets is not a question of winning or losing money in any individual trade. It is a matter of faithfully executing a proven plan, without fail, in every single trade. This is the key to long term profits.
The worst thing a trader can have is an opinion about the future behavior of price. When we form opinions that are not strictly based on the mathematical reason of the market, we will inevitably look for and find reasons to justify them. Opinions allow our emotions to come into play as we search for information to satisfy our need to be right. Price does not respect our opinions, nor does it care about our ego.
With technical analysis, we can see price's past and present behavior very well, but we can never know exactly what the future will bring. We always work with probabilities, not facts. Many people have great difficulty in making decisions and acting without facts. Consequently, most will have encounter great difficulty trading the financial markets.
There are many techniques to create our desired future. Many of these techniques involve a link between the conscious and subconscious minds. Our subconscious mind serves as a filter. No conscious experience can pass through this filter unless we truly believe in it. In other words, the subconscious mind is our faith. When we truly believe that trading success is ours, even when it is shrouded in probability, we open the possiblility of realizing this success. Unfortunately, most beginners fail or give up before they have enough experience to believe in their own success.
Even after we conquer our emotions, thoughts, expectations and behaviors...and even if we survive long enough to believe in success, if we do not execute our trade system perfectly in all respects, the probabilities of losing rise drastically. Discipline and consistency are critical in long term success.

All of this requires months and sometimes years of training and practice. Creating and maintaining a healthy trader's mentality is a constant challenge. You must feel good about yourself and about life in general. It is necessary to surrender to the market's reason. It is essential to consistently execute with a positive attitude, strong faith, and unfailing discipline. These skills cannot be learned in a weekend lecture. Healthy trading psychology is a lifestyle which must be practiced every day.

Unfortunately, the history of most beginning traders is always the same. They enter the market with exagerated expectations and too little knowlege, experience, and capital. They focus too much on charting, risk too much and too often, avoid the experience of others, and base their trades on chance or emotion. Eventually, most lose everything before they can learn to survive and believe in their own long term success. You may think: "Who cares about trade psychology! I want to win a fortune and I want to win it now" Fair enough. But before you make your first trade, familiarize yourself with one of the oldest and wisest addages in trading: "There are old traders and bold traders... but there are no old, bold traders." In general, bold traders risk too much, blow out their accounts, and die a quick death. Old traders found the right balance between risk and reward. Their conservative approach allowed them to survive in the market long enough to develop a healthy trader's mentality. From that point on, they assured their long term success.

Take it easy. Take your time. Protect your capital. Learn to survive. Put your ego on the shelf. Learn to believe in yourself. Understand that all this takes effort and time. You will suffer some setbacks, but you can succeed if you truly desire to do so. No one can do it for you. In the PhiCube community, we focus intensely on developing and maintaining a strong trader psychology.

Join our community and see for yourself what works, live, everyday. We can help protect you and teach you to survive in the market...so you can learn to believe in yourself. One last tip: "If you are not having fun, you're not doing it right."