TRADING PSYCHOLOGY
Shedding Light On Success And Failure
Reorienting a mindset for specific trading components requires understanding your current one, knowing what leads to trading success, identifying what needs to be changed, and developing a plan during trading activity. So how do you do it?
A trader’s profession requires a blend of training and experience from the fields of business, economics, mathematics, and psychology. What percentage comes from each discipline, however, is always a matter of debate. Some traders say that psychological factors can be removed by using rule-based mechanical systems with automated entry and exits. Some believe that combining discretion with mechanical signals provide the best results, while still others believe that trading is 100% psychological and that traders only trade their belief system about the markets and not the markets themselves.
Winning vs. losing
But one thing that everyone can agree on is that succeeding as a trader is difficult. Statistics suggest that in the commodity futures and forex markets, 90% of everyone who try their hand at trading lose over the long term. But there are untold numbers of successful trading systems and methods that have proven to be winners. So why do so many traders lose money?
The key is how they trade. How people must think during trading is exactly the opposite of how they are conditioned to think in business and society. How a trader views his or her trading means everything in the realm of the financial markets! It is the difference between winning and losing.
Groundbreaking work has been achieved in the field of trading psychology, but little attention has been paid to the business paradigms and social norms that affect a trader. Here, I look at several critical ingredients in the recipe for successful trading and the kind of mindset change that must take place within the trader for him or her to succeed.