Psychology of a Winning Trader

People are motivated by two emotions: hope and fear. This is the most important thing to remember about trading psychology. You first became interested in trading and began bouncing around the idea of becoming a professional trader because you hoped for gain. At that time, you did not think much about the fear of loss. (At least, we hope you did not, because fear is a terrible reason to begin trading. If you can't begin trading with a sum of money that you can afford to lose, then you really would be better not trading at al.) You learned about trading theories and opened up your first practice account. You practiced and practiced, and the losses didn't really bother you all that much because it wasn't real money. You felt like you knew what you were doing, so you funded your first real account and started trading.

And then everything changed. You started trading with your own money, and suddenly your losses became a lot more real to you than they were before. You began to be motivated by fear as well as hope.

Here's the thing about trading psychology: fear is always a terrible motivator. It's a terrible reason to get into trading, and it's a terrible reason to make a trade. Some other professional traders claim that the two main emotions are fear and greed, not hope, and they characterize greed as excessive hope - taking too many chances in order to make greater gains. This isn't really true, though, because the hope of gain is a good motivator, and it doesn't just get you into trouble the way greed does. Temper your hope with realistic expectations, and you will not be carried away.

The second most important thing for a professional trader to remember about trading psychology is this: it's not about you. It's easy to believe that you personally are awesome, if you make a few successful trades, or that you personally just stink if you find yourself on a loss pattern. This kind of thinking is crippling for a professional trader. It leads to recklessness after win patterns and despair after lose patterns. If you want to be a winning trader, you must learn to stop taking losses and gains personally. If you can divorce yourself from the feeling that your personal value is connected to your account balance, you will be calmer and more rational about your trading choices, and can make trading psychology work in your favor to become a winning trader.

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