The Importance of Trading Psychology
In this video:
00:25 – Understanding yourself
00:54 – Dealing with uncertainties and the emotions involved
01:30 – What type of person and trader are you?
02:20 – You need a good trading plan
03:01 – Review your trades
03:07 – Client makes 8% in the last 2 weeks
03:34 – Control your risk and eliminate fear
04:05 – Don’t revenge trade
04:30 – Leave your comments below
Do you have a problem with psychology and understanding the market and yourself? If you do, listen up, I've got some great tips and information for you.
Hi Forex Traders, it's Andrew Mitchem here, the owner of The Forex Trading Coach. Today is Friday the 15th of April.
I've had a lot of e-mails over the last week or so from people asking me to explain more about psychology. To try and give them some tips and some information to help them understand themselves and to help them understand their own trading, because it's an issue that so many people have a problem with. It's also an issue that very few people actually discuss, but it's one of those issues within your trading that can help make or break you as a trader. Let's talk about some of the problems.
Dealing with uncertainties and the emotions involved
Trading, because we're dealing with an unpredictable market and we're dealing with maybe trading by yourself, you may be … The other people around you don't maybe understand what it is that you're doing and you're trading with money. All of those things put together make trading quite an emotional business to be in, but everybody focuses on the good things, in terms of their profits, and looking at charts, and what news came out, etc. Nobody really focuses on having the emotions under control within your trading, but there's several things you can do to actually help you with that.
What type of person and trader are you?
First of all, you need to understand what type of person you are and what type of trader you are. There's no good trading five minute chart scalping the market if you really can't stand the stress of watching every single pip move up and down. The other end of the scale, there's no good taking weekly or monthly chart trades if you can't stand watching a trade stay in the market for over one day. Understand what type of trader you are and then implement that and put that into the strategy that you trade. There's no good if you are a believer in fundamental news announcements in just watching charts only. Likewise, there's no good in just watching the news announcements if you are a technical trader and you like watching the charts.
It's about finding what blend works for you of time frames, what style of trading, what time of day, etc. All those type of things come into it.
You need a good trading plan
The other thing that you really need to have a good trading plan and you need to review the trades that you've taken. Having a good trading plan, that means writing down the plan, what it is exactly that you're looking for, for every new trade. Had you handled open trades? Had you handled losses? What is it that you do with your trading on a day-by-day basis? What set ups are you looking for? What type of trades, reversals, continuation patterns, pin bars, news announcements? What is it that you're looking for to take in a new trade?
Review that daily. Look at it before you even turn your computer on and get your mind fresh in understanding what it is that you're looking for before you even look at the charts that day.
Review your trades
Review your trades; what worked, what didn't work, why did it work, why did it not work, and get an understanding of what happened there.
Client makes 8% in the last 2 weeks
A client of mine just yesterday sent me an e-mail saying, “Hey Andrew, loving your course, I've made 8% since I've gone live in the last two weeks and all I'm doing is exactly the same as I did on a demo account and what I've also done,” this lady said to me is she's made a trading plan, which she reviews every single day before turning her computer on, exactly in the same way that I've just mentioned.
It's proven that it works when you have a good trading plan, and also a good strategy and an understanding of the market.
Control your risk and eliminate fear
Have controlled risk within your trading. Don't gamble within the trading. If you have controlled risk and you know that exact amount that you can lose on a particular trade if it goes completely wrong, that helps you with the fear within your trading. You're not looking at closing early because you think you're going to lose too much money, or you're not scared to take a new trade because you think you're going to lose, because you know the controlled risk that you have. Don't go gambling, don't place ridiculous position sizes in the hope that it's going to outweigh all the losses that you just had.
Don’t revenge trade
In other words, don't revenge trade. It's not the market's fault that you've lost in your trades. At the other end of the scale, just because you've had a string of winning trades in a row and you've made some good money, well done, but it doesn't mean to say that you're indestructible. Don't then go placing stupid trades and give back some of those gains back to the market because you've done silly things thinking that you just can't lose. Get all those things right and it will really help you with your trading.
Leave your comments below
Hope that helps. If you have any comments, please leave them below, there's a video. This is Andrew Mitchem, The Forex Trading Coach.