Here are five important trading psychology principles.  Some are myth-busting; some are common sense.  They all tell the truth about trading and should be kept in mind.

  1. Trading is not about talent or innate abilities.  Trading doesn’t, for example, require a high IQ.  There is no trading gene that successful traders possess and unsuccessful traders don’t possess.  There is also no one personality that is best for trading.  Trading is about developing your knowledge, skills and abilities. 
  2. All the good trading psychology in the world will not make you a better trader if you don’t have solid ability and skill in reading a chart.  Many traders think that it’s their psychology that prevents them from success because they are anxious or fearful.  While excessive anxiety should be addressed, most often it’s not psychology but lack of skill that torpedoes traders.  Psychology supports your trading and can help you to improve your performance of what you already know.  It cannot make you into a skilled trader if you haven’t developed those skills.
  3. Trying to suppress and control emotions won’t make you a better trader.  In fact, it would degrade your performance.  Trying to control strong emotions like fear, greed and hope draws your attention away from the market.  You can’t manage a trade when your focus is on your internal state.  The very best traders learn to live with and use their emotions.  You are human.  It’s impossible to be a robot.
  4. Your mental game is important when the markets are closed—in some respects, it’s even more important than when the markets are open.  If you can’t focus on studying your charts, practicing your craft through simulation trading and developing a game plan for your next trading session, then it would be hard for you to focus when it really counts—i.e., when you are trading and money is on the line.
  5. Practice (simulation) trading is vitally important.  How can traders possibly perform well in an unforgiving business when they don’t put the work in?  It makes no sense to believe practice trading isn’t necessary or “It isn’t worth it if there’s no money on the line.”  A professional athlete continuously trains and would never think about going to a match without having practiced and prepared.  Immerse yourself in the markets with good practice.  The hard work will reward the trader with handsome dividends, both mental and technical.

These are a few of trading psychology principles that are important for traders to remember.  For a free, seven-part guide (plus a bonus) to better trading psychology, you are invited to the author’s website where you will find this and other free resources on trading and trading’s mental game.  Just click here.