Many traders overlook the importance that trading psychology plays in successful trading. They follow all of the rules from a course, but they are never able to trade as well as the person teaching the course and they wonder why.
More often than not, it is because they have not taken the time to figure out what gremlins are running around in their own head. They blame their system, they blame the broker, they blame their dog.
If someone sticks with trading long enough, they usually figure out that the key is psychology. But why does it take that long to figure it out?
Here are three reasons why I believe that trading psychology is not seen as very sexy or important.
It's Not As Easy To Quantify As Trade Setups
If you teach someone a to enter a trade when the moving averages cross over, then that is pretty damn simple. But helping someone figure out why they chicken out every time those moving averages cross…infinitely more difficult.
Every person on this earth is unique, with their own psychological makeup and history. Solving that puzzle takes time and work from the trader. Sometimes the trader does not want to solve those issues.
It's The Hardest Part Of Trading
Let's face it, mastering your trading psychology is one of the hardest things in the world. There are very, very deeply rooted forces at work when it comes to money.
What did your parents teach you about money? Do you think money is bad? Do you think that you don't deserve money?
As we mentioned above figuring out your psychology isn't as simple as telling you to enter a trade on a moving average crossover. You need to be truthful with yourself and be able to face your fears and natural tendencies.
Fear, greed and indecision are a bitch. Make your psychology a priority and the rest will come easier.
There Aren't Nearly As Many Books Written On The Subject
Out of curiosity, I did a quick search on Amazon one day. When I searched for “trading psychology” this is what I got:
Notice that there are only 1,666 results for books that talk about the psychology of trading. Is that a lot? Let's see…
Then I did a search for “trading systems” and here is a screenshot of the results:
Since there are about 17.8 times the number of books dealing with trading systems, there isn't nearly the same mass of material out there about mastering what is between your ears. If there were more books out there, people may pay more attention to psychology.
…or not. The reality of it is that if people don't buy trading psychology books, then publishers won't want to publish them. It just becomes one big negative feedback loop.
But the fact still remains, since there isn't a ton of material out there on it and therefore it doesn't seem as attractive.
Why Trading Psychology Is Sexy
I actually got into trading because of the psychology. I found it extremely fascinating to learn about how people act in herds and why I do the things I do.
And if nothing else, making money trading is very sexy. If psychology leads to successful trading, then it is sexy by association.
What have you done to overcome your negative trading psychology? Let me know in the comments below…
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Photo: h.koppdelaney
Hey, I am a simple guy at heart and I have the ability to be patient and cool headed in high stress situations. I developed this ability from playing football as a defensive back on the collegiate level so it automatically translates to trading. In regards to my method I trade the daily time frame looking for certain price action patterns to execute my edge. If there is no pattern I do my analysis and walk away and wait until the next day for a new pattern. Keep it simple!!!
Cool, thanks for sharing Quentin. I’ve heard that other traders attribute their success in trading to their sports background, so it makes sense. I agree, keep it simple!
Hi Hugh. This is a very good post. One big tip that I discovered is to minimise “shop talk” with non-traders. They have wild misconceptions about trading and can project them onto you. If you’re successful, they expect you to be swimming in cash and the pressure builds to be consistently profitable. Then once you’re in statistical drawdown, they think you’re going to lose it all. I keep trade talk to a minimum in RL and only share my blog / thoughts to a select few friends and colleagues. A trader’s psychology is like clockwork – the slightest disturbance can put if off-balance.
Hi Kevin,
Thanks…yes, great point. Especially when those non-traders are good friends or family. I like the name of your blog BTW. Hope you are trading well.
Cheers,
Hugh
Hey,
First of all, I want to congratulate you for the blog, it is awesome 😀 I’m not an english speaker, please excuse the writting mistakes :).
I trade from Spain, I usually trade with 1H or 1D charts, and based on the information of the last closed bar. I set the alarm 5 minutes before the creation of a new bar to analize the situation, the potential scenarios and what should I do in response, and after that 5-10 minutes of consistent work, I just turn off the screen and use these 50 minutes in non related things, like jogging, eating with family, or working. Sometimes if markets aren’t doing much, I can take a 2 hours break, so I can take a walk at the beach or a sun bath.. But usually I’d rather work, lately I’m working on translating my trading system to an EA that takes the trades for me, and I can do it while live trading with this compartmentalized system. It’s like the bigger the energy of negative trading psychology can work against you, the bigger use you can take from it just using all that energy in construtive ways.
Thanks again for the blog! I like your way of seeing things 🙂
Hi Guillem,
Thanks, no worries…I’m used to getting comments from people all over the world.
Very cool, sounds like a great way to trade. You have fit trading very well into your lifestyle! Yeah, an EA can be a great time saver when it is based on your trading system. 🙂
Let me know if there is anything that I can do for you in the future.
Cheers,
Hugh