TRADING PSYCHOLOGY

Psychological factors are an important factor in the success or failure of traders. Follow the stages of trading psychology development below to know which stage you belong to and what you need to improve to plan to increase your level!

1. The stage of confusion

This is where it all starts, where everything begins. You know little or nothing about market structure. You have no concept of the correlation between markets, between markets and the economies of countries and the world.

Price charts seem to be a meaningless mix of colorful curves and doodles that look more like a painting from MOMA (The Museum of Modern Art) than anything containing information. You think anyone who can predict where the price will go based on this mess must be using black magic.

However, when you start observing, reading, studying, the mess can start to form a colorful picture and make sense.

2. The Illusion Stage

You watch the markets every day. After a while (sometimes quite a while), you notice a particular phenomenon that appears frequently and seems to work quite consistently. You focus on this pattern. You start to find more and more versions of it in different markets and they all repeat! Your confidence in the pattern grows and you decide to pounce on it the next time it appears. You pounce on it and immediately hit your stop loss. You are drowning in total losses that are beyond your imagination.

You don’t stop there, you continue to study this pattern even more. And the next time it appears, it plays out exactly as predicted. But again, again you lose, you decide to try again, on a larger volume and unfortunately, this time the whole hit is right above your stoploss.

Actually everyone goes through this phase, but few understand that this is part of the win-lose cycle. They still do not understand that losses are an inevitable part of any system/strategy/method, that is, there is no such thing as a 100% winning method.

3. Doubt phase

You have done a lot of research and put a lot of effort into your trades and this common failure happens and you feel betrayed by the market, betrayed by the books and materials, experiences, teachers that you have tried to learn from.

Everyone defaults to their mindset that trading must be profitable, but every time you make a trade, you are a loser, even though all the setups worked perfectly before you entered the battle. And since one of the most painful experiences is failure when success seems easy in your head, this confusion turns into anger: anger at the gurus, anger at the providers, anger at the analysts, the courses, the brokers, the market makers, the experts, the manipulators.

The blame game based on this reason is the final key, and explains a lot of what you find on countless forums and social networks.

At this stage, if you overcome it, you will move on, otherwise it will be a barrier forever and eventually you will not be able to overcome it.

4. The Confusion Stage

If you do not give up, you continue to research and study. Because you have failed with the patterns and so on, you will imagine some “secret weapon”, a “holy grail”, some super system, and think that it will help you filter out all the bad trades.

You buy every book, attend every course, sign up for every newsletter and consulting service, join every forum. You buy expensive software and are hyped for profits. You spend whatever it takes to buy success.

Unfortunately, you overcommit to your charts to the point where you become paralyzed. With so much input, you can’t make a decision, especially since the information is rarely consistent. So you focus on those who agree with the direction of the trade you’ve taken (or, if you’re the aggressive type, you just look for those who dare to prove you wrong).

These are all characteristics of fear-based money.

Without a true acceptance of the loss and risk involved in trading, you’ll be circling around like a butterfly looking for anything or anyone who will tell you the compliments that you know what you’re doing.

This serves two purposes:

(1) To blame others and

(2) To relieve you of the pressure of running orders when the indicators you use are conflicting. MACD indicates a buy signal, Trendline indicates a sell signal. EMA indicates a trend, RSI signals an overbought market. By the end of the day, your brain is petrified.

5. Introverted Phase

Traders can get themselves out of the fourth phase and use their experience there effectively. Instead of focusing entirely on what is out there, you start asking yourself