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What Is Trading Psychology?

Trading psychology refers to how individual psychological processes, such as thoughts, emotions or personality characteristics influence trading performance and determine trading success or failure.

Our aim is to understand a) how our human nature and psychological self interferes with investing/trading decisions and b) what mental & behavioural strategies we may use so we increase trading effectiveness.

Is there a real need for trading psychology in order to become a successful trader?

You may be thinking that if you have adequate technical & fundamental analysis knowledge, if you have a trade and risk management plan, if you do your research consistently and correctly and if you do understand the market, then there is no need to go into understanding psychology as well. Who has the time for all that?

It is true that if you have mastered all the above, then you are in the right way of becoming a successful trader. You may be already turning profit. But, let’s not forget that you can never escape your self. You, like all of us, are a human being with thoughts, biases, judgements and you may often experience difficult emotions such as regret, sadness, anxiety or empowering ones, like pride. Some days are good for you and some days not so good-you just got up  on the wrong side of the bed.

Our inner world is ever-changing, our inner life almost never a flat line. Our internal world always communicates and influences the external world and vice versa. Trading is strongly influenced by emotions, thoughts and beliefs in ways that we may often no even realise. 

Trading is strongly connected to psychology because it involves an object of intense emotional attributions: money. Besides that, it has to do with our need to be right, to create, to feel confident, to achieve, to build security, to win.

Please take some time to consider:

  • You may have a trade plan but often not follow it
  • You may theoretically know about risk management but always risking more or less
  • You may have mastered the technical indicators but feel stuck in action
  • You may know what mistake you did last time, but there you are, doing the same mistake again

Why?

One of the reasons that may account for failure is that you are probably unaware of how your psychological self interferes with the perfect trading plan.

This whole site is dedicated in making evident how understanding psychology has a lot to do with success in trading and that is often the missing element that accounts for traders’ failure.