Binary Options Trading in 2023 – We Can Still Trade? Ten Psychological Trading Tips to Win. Many great traders who have written about their experiences have talked about how their inner psychological struggles had caused them losses, even when they “knew” that whatever they were doing was wrong. Undoubtedly, psychological factors are essential in trading Forex or speculating on anything.
Mastering your trading psychology won’t make you money in itself. Still, if you are unaware of the tricks your mind is trying to play on itself, you will probably lose even if you are a good trader and are right in your trading decisions. There are a hundred ways that a trader can quietly sabotage him or herself. First, there is a “physical” aspect of trading.
Ten Psychological Trading Ten Psychological Trading Tips to Win
Hopefully, it will help you in your trading journey to be aware of several tricks traders often get themselves caught up in psychologically. Sometimes you have to experience something yourself to learn from it: nothing teaches like direct experience. Hopefully, some of these points will give you a new understanding of trading mistakes you have already made or warn you of mistakes you have not yet completed.
Try not to blame yourself when you make a trading mistake: get your “revenge” instead of learning your lesson and not making that mistake again.
Ten Psychological Trading Tips to Win
Ten Psychological Trading Common Mental Trading Mistakes
Not Believing in Your Methodology
It is surprising how many people trade without being convinced they can make money, or at least sure that they have a good chance of it. But, even if you think you do believe in what you are doing, are you sure you don’t have significant doubts hiding just beneath the surface? The answer to this problem is to test your methodology.
For example, if you follow trends, take the time to backtest on a lot of historical data. Does it show good results most of the time? Is it based on a solid concept, like mean reversion or momentum? If the answer to these questions is yes, you should believe in what you are doing, and don’t forget that you believe in it, either. Ten Psychological Trading Tips to Win
Ten Psychological Trading Not Making a Plan and Sticking to It
This one sounds very obvious. It is about planning, having several projects, and leaving some flexibility. For example, if you are day trading, you should have a method you use to decide each day which currency pair or pairs you will trade. However, suppose the team you select goes nowhere while another group takes off. In that case, you might want to be able to reconsider your decision instead of just “sticking to the plan,” say, by allowing yourself the option to change your mind every 1 hour. This is a “plan,” but a plan can include some structured flexibility.
Not Appreciating the Difference Between Planning Something and Living It
Making a plan that works on paper is pretty straightforward, but living it in real-time can be different. A good example is planning to take hundreds of trades over a year or so and expect your account to be in a drawdown of -20% as you go through a run of 20 consecutive losing trades. Of course, you might work through this backtest in a day and decide such losses are acceptable.
You will likely feel very different when you spend weeks or months repeatedly losing real money while watching your account balance shrink. There is no good answer to this dilemma; you must be aware that running through months in an hour or so is not necessarily good practice psychologically for bad trading times. Ten Psychological Trading Tips to Win
Ten Psychological Trading Being Afraid to Take a Trade or Too Eager to Make a Trade
These are opposite sides of the same problem. The best way to overcome this is to tell yourself every day that you are prepared to take either several trades or no trades at all and that what you do will depend entirely upon the condition of the market instead of the state of your wallet or your mood. There will be days with no action and days with plenty of action. You have to adapt to the circumstances.
Making “Deals” with the Market
Tell yourself that if the price goes up another ten pips, you will get out of the trade, or if it doesn’t go up in the next hour, you will exit the business. This is just your mind running with its anxiety and talking nonsense. Ignore it, hold firm, and only exit trades according to your plan.
Itching to Make a Profit
You see a profit on the table and think how nice it would be to take it and stop trading for the day and bask in the glow of a good trading day. This is laziness and self-indulgence and has to be fought. The only reason for making a profit should be because you have a real reason to believe it will probably not go much further in the desired direction. Let that market demonstrate that to you: don’t anticipate.
Bailing Out on a Loss Too Early
This is the same as itching to take a profit. So it might be that you need to reconsider your risk management strategy.
Letting Losers Run
There is a simple way to avoid this: always use a hard stop loss and do not ever widen it.
Ten Psychological Trading Not Taking Responsibility for Your Trading
It is so easy to make excuses. If I hadn’t missed the bus / been distracted/been in a lousy mood, I would have handled that trade better and made money instead of losing. You must ensure you don’t miss the bus, get distracted, or fall into a bad mood. Once you take responsibility for all your trading, your mood can lift as you see there is a way for you to make things better. It is a marathon journey, not a sprint.
Endless Chase for the “Holy Grail”
You do some testing and devise a yearly strategy that averages 20%. But wait! You try something else and find it makes even more, say 25%. Is there something better out there? Maybe, but this searching and testing process can take a long time. Consider this: if you spend six months testing instead of trading in a committed way to find a way to make 25% instead of 20%, you just lost 10%, and it will take you another year to make it up! So, by all means, continue searching, but don’t let it affect your forex trading. It doesn’t have to be perfect if you have a reasonably solid methodology!