Trading Psychology and tips

[wallet4bitcoin]

This topic is intended to help traders dealing with trading psychology. I have experienced it and read about it and decided to share my take on it. This is not entirely my own excerpt but a culmination of people's experiences, points and opinions also.

I have been, to the best of my knowledge, concise in communicating my submission through this write up for your comprehension. Feel free to make input and edits as required.


Intro

Trading has been the most independent and global approach towards personal income generation from the foreign exchange/derivatives market. These players in the trading industry however, encounter challenges that interfere with their trading operations beyond their direct involvement in finance but the consequences are obviously evident in their finances, it’s generally called Trading Psychology.

The study and knowledge of psychological and emotional occurrences influencing the behavioral patterns, performance and decisions of traders in the financial market is best described as trading psychology. It is no doubt that a significant percentage of traders have, over time battled with trading psychology and its challenges.

I’ll narrow down the key elements posing a challenge to traders to ‘Greed and Fear’ and its antidote as Risk management and Discipline.
If the key elements are addressed properly then a trader has little or nothing to worry about once he has his knowledge of trading in place.

Greed is the desire for more profit, often characterized by a fact-less believe that a market condition will continue in the direction of profit for his benefit.
Fear, contextually, is the refusal to allow the researched output-birthed setup to play out, thereby terminating the process abruptly irrespective of loss or gains accrued. 

These challenges can be tackled by way of Discipline and Risk Management.
Discipline the ability is to stick to a trading rule or plan irrespective of the conditions, pleasant or unpleasant. One must be disciplined to believe in oneself irrespective of what the outcome of trades are and accept it as a strategy either to adopt or to further modify, but, has been personally derived to sooth personal trades.
Risk management is analyzing the potential losses in advance and mitigating them, this is done to protect the entire loss of the trading capital. Risk management is an essential part of trading culture, if you must remain in the trading business, you must learn to prioritize risk management as an essential tool for success.

Tips on Trading Psychology

Knowing that your success in the market is largely dependent on your trading psychology, it is therefore pertinent to say that it should be given noble consideration by every trader.

Prioritize your Setup
The setup is not guaranteed to always playout as expected but that doesn’t invalidate your speculative capability or ability to analyze, it only means that the market direction deviated from the plan, which is also expected as one of the characteristics of the market, although it comes with its own downsides as you get to incur losses but again your risk management will mitigate that moderately.

Downturns are normal
Always note that you are a player amongst millions of players including financial institutions, things wouldn’t always go your way, with this consciousness, invalidated setups will not mess with your emotions. It’s a default understanding, therefore, you have a large heart to accommodate it even before it shows up.

Evaluate your Trading Strategy
The idea behind trading is to make profit, therefore, the trading strategy you choose to deploy has to reflect positive growth on your equity, if it doesn’t, then you should consider re-evaluating it to something better.

Be Focused
Too much content on trading and traders to digest on the internet, as much as they might be valid and true, they might not be relevant and consistent with what builds your confidence and capability in the financial market. Focus on what works for you and cut out the noise.

Utilize Risk as a Tool (Leverage Risk)
You must understand that risk is an integral part of trading but can be used as a tool at minimal levels. Readjusting your stop losses and incurring losses in a bit to reduce your loss isn’t an ideal approach. After a proper setup involving a moderate risk management, allow for trade to play out as most times, we incur the losses we are avoiding when we go readjusting our stop loss.

A Winning Exit Plan is Key
You must understand that having a winning exit plan in every trade is instrumental to the success of that trade even before opening a position. You are more relaxed when you have a take profit in place even before your buy/sell order is filled.

Your Losses, Your Lessons
Revisit the strategies and mistakes that caused your lost trades and accept responsibility, learn from it and improve your skills, you’d feel a whole lot better. In cases where unforeseen circumstances in the market played out and it deviated from your result, you accept the looses and keep the grind alive.

Trust your Analysis
As long as you do you due diligence on your setup after analyzing, take the shot. It is never a guarantee but once your setup says ‘go’, go with it.

Lastly,

Win Always
“You may lose a battle but always win the war”
Let your number of winning trades always outnumber your lost trades. An average of 60% winning trades (weekly or monthly) makes you a profitable trader and keeps you winning.

[Don Pedro Dinero]

Interesting but what would be more interesting would be to know for sure if you really are a trader and also one of the few who earn money in the long term, because what you have written can be done by gathering information on the internet and some experience in trading but without being a consistent winner like the vast majority. Seeing the few posts that you have written in this section since you registered and that in none of them you talk about specific trades or put charts, I think it is the latter.

[adaseb]

Wasn’t there a thread like this posted last week. I remember replying with a similar solution when it comes to trading psychology.

There is an old book called “Trading in the Zone” and it’s not really for technical analysis but it will shape how you react when you are in a trade. It’s probably 2 decades old but it’s principles still apply today and to crypto markets also. You can find this book anywhere. You will read a little bit and you will be blown away how accurate it is.

[wallet4bitcoin]

Interesting but what would be more interesting would be to know for sure if you really are a trader and also one of the few who earn money in the long term, because what you have written can be done by gathering information on the internet and some experience in trading but without being a consistent winner like the vast majority. Seeing the few posts that you have written in this section since you registered and that in none of them you talk about specific trades or put charts, I think it is the latter.

I trade but I'm not a fan of putting trading content out there.  I'm trying to be different and by being interactive, I get to learn even more. Research is the norm with everyone in the crypto space, I also leveraged it to arrive at the post.

Although no personal experiences was shared, I'd say I have been a victim of it and I'm progressively working on being better.

Wasn’t there a thread like this posted last week. I remember replying with a similar solution when it comes to trading psychology.

There is an old book called “Trading in the Zone” and it’s not really for technical analysis but it will shape how you react when you are in a trade. It’s probably 2 decades old but it’s principles still apply today and to crypto markets also. You can find this book anywhere. You will read a little bit and you will be blown away how accurate it is.

I much appreciate your recommendation. I'll get my hands on it. Anything to get things straight is of great importance.

[jeraldskie11]

Backtesting is also an important aspect of trading success. Because, according to some, trading is 10% analysis and 90% psychology. You can acquire confidence if we backtest our strategy before implementing it in a live trade. If we are confident in our plan, we may be confident that we will be profitable in this manner.

There is an old book called “Trading in the Zone” and it’s not really for technical analysis but it will shape how you react when you are in a trade. It’s probably 2 decades old but it’s principles still apply today and to crypto markets also. You can find this book anywhere. You will read a little bit and you will be blown away how accurate it is.

That's a great book to read to improve our trading psychology and also we can add "Atomic Habits" for it.

[Don Pedro Dinero]

I trade but I'm not a fan of putting trading content out there.  I'm trying to be different and by being interactive, I get to learn even more. Research is the norm with everyone in the crypto space, I also leveraged it to arrive at the post.

Although no personal experiences was shared, I'd say I have been a victim of it and I'm progressively working on being better.

That's what I was afraid of, that this post was not purely from your experience as a long term and consistent successful trader, but from some research along with some of your own experience where you say you need to improve.

If you knew the percentage of successful traders out there you wouldn't waste another second on it. The thing is that the houses earn so much in commissions that they keep promoting it with basically paid advertorials, sometimes covertly and sometimes they don't even bother to hide that they are paying for that promotion (another thing is that they are legally obliged to put it if it is a paid advertisement but we know it doesn't always work that way)..

[SmartGold01]

Be Focused
Too much content on trading and traders to digest on the internet, as much as they might be valid and true, they might not be relevant and consistent with what builds your confidence and capability in the financial market. Focus on what works for you and cut out the noise.

I think this point is another cool way to focus as well, there are lot of people whom has loose focused due to much noise out there by combining many contents that talks about trading without being focused on their previous knowledge to develop themselves. Reading different content without practice I mean trying out the strategies may not provide any meaningful results whereby the always dreamed of being a professional trader, I might not go into detail as I can only speak within my knowledge and capacity hence, interest are being drawn from content and how we see the whole progress otherwise whomever that doesn't make progress and shares there ugly situations always scares new traders or beginners who might wants to venture into trading.

Do we mentioned anxiety @wallet4bitcoin?
Does this always plays a very bad role in trading, because someone with such heart or mind would also not making much progress as its always affect the hearts and mental picture on trading guide and progression.

[wallet4bitcoin]

I trade but I'm not a fan of putting trading content out there.  I'm trying to be different and by being interactive, I get to learn even more. Research is the norm with everyone in the crypto space, I also leveraged it to arrive at the post.

Although no personal experiences was shared, I'd say I have been a victim of it and I'm progressively working on being better.

That's what I was afraid of, that this post was not purely from your experience as a long term and consistent successful trader, but from some research along with some of your own experience where you say you need to improve.

If you knew the percentage of successful traders out there you wouldn't waste another second on it. The thing is that the houses earn so much in commissions that they keep promoting it with basically paid advertorials, sometimes covertly and sometimes they don't even bother to hide that they are paying for that promotion (another thing is that they are legally obliged to put it if it is a paid advertisement but we know it doesn't always work that way)..

If you read the second line of the OP, you'll not my submission as "this is not entirely my except but a culmination of people's experiences, points and opinions"

My POV on this post is mostly individualistic rather than corporations or institutions. I trade as an individual, with no expertise or experience from an organisational perspective.

I might have to write on organisational standpoint but I'd love to have that experience first.

Thanks for shedding more light on it, I'll look in that direction as well, we keep learning everyday, I have again, today.

[Faisal2202]

Discipline the ability is to stick to a trading rule or plan irrespective of the conditions, pleasant or unpleasant. One must be disciplined to believe in oneself irrespective of what the outcome of trades

I think it is wise to advice someone to stick to the trading rule or plan but it will not be wise to advice other to stick to the trading rule irrespective of the conditions. Because, sometimes conditions are not in favor of traders. Let's say a trader "X" has took entry at $30k in BTC and suddenly a bad news came and the trader has make a strategy in which he set SL at different levels. Means he set first SL when market will come to $29k and the second SL when the market came to $28k.

If he follow the plan or trading rule he made then he will lose more after a bad news (unexpected events). So, it is better to keep an eye on the market and it is always a best practice to keep an eye on profits and loss ratio and not to stick to trading rules.

PS: You started a good topic but IDK why it is so hard to understand the points you aforementioned but still they are useful and meaningful but please make them User friendly next time. I hope you won't mind me. And I can see you made some posts consecutively. I think you don't know the rules but consecutive posting is prohibited.

[Hamza2424]

Those are some bold words, but hey, that's what we expect, right?   From what I've seen, a lot of these kinds of tips are usually shared by newcomers who are eager to earn some merits and move up the ranks. Nothing wrong with that; everyone's got a right to try! But I have to say, your content seems pretty solid & demanding at least can see something decent here in this section. I would love to see more such threads, obviously not the same topics.

I really like your style, especially that motivational ending: 'You may lose the battle, but you should win the war.' That's some real inspiration right there!   And it's true, if your Realized PNL is in the green, you're doing well because your wins outweigh your losses. But remember, it's not just about winning 51 out of 100 trades; there's a limit too. In my opinion, it's a gradual journey toward maintaining a surplus, not something that happens overnight. 📈

If he follow the plan or trading rule he made then he will lose more after a bad news (unexpected events). So, it is better to keep an eye on the market and it is always a best practice to keep an eye on profits and loss ratio and not to stick to trading rules.

There's a rebuttal as well, the sort of events you are talking about may not be very effective on the long-term time frame traders, as such events can disrupt your analysis for Momentary frame.

[blockman]

With the losses, that's how a trader grows. If no trader will have their own losses, they won't learn new strategies and what's best for them. I agree that these losses are like entries to check our mistakes and as well as the gateway to improve.

Trust your Analysis
As long as you do you due diligence on your setup after analyzing, take the shot. It is never a guarantee but once your setup says ‘go’, go with it.

About this, sometimes I don't trust my own analysis but this is also like trusting our own analysis. It may not be as perfect as the others but you're right that if you think that you're doing your analysis flawlessly then follow and see what will be the result of it.

[usekevin]

Every trader should trust their own strategy and analysis in the trading.Because trading need of patience and only the panic less person will earn good money from the trading.The crypto market was unpredictable one,only on that day we can come to know it’s the bear or bull market.Some traders analysis the chart and create some tactics based on the old flow of the chart.If you had the experienced trader friends,ask their strategy of gaining money the current market flow.Panic selling is never expected at any point.

[palle11]

Downturns are normal
Always note that you are a player amongst millions of players including financial institutions, things wouldn’t always go your way, with this consciousness, invalidated setups will not mess with your emotions. It’s a default understanding, therefore, you have a large heart to accommodate it even before it shows up.

This is a trading reality and every trader should understand that it comes once in a while depending on how you use your strategy. This downturns sometimes makes you to doubt your already working strategy and you want to consider changing because you have lost a lot that season. At this time, some traders also feel that the market is manipulated because whatever you do seem not to work. Even though the issue of manipulation is still a possibility or an ongoing debate but what I suggest during down time is to take a break and wait for a clearing opportunity to enter another order instead of continuously forcing the market and losing.

[Mame89]

We can think of trading like running a very long distance and the model is our breathing. so when running for a very long time we can regulate our breathing. we can achieve our goals but if we can't catch our breath or can't manage our capital then we will stop at the front or in the middle. then we have to take another breath or have to deposit again. So here we make sure we have to be careful in thinking, don't trade. I want to make money fast or get 200% profit in one month. I want to get rich quickly, not because I remember that if we want to speed up the process, we will lose a lot of money by breathing as much as possible. Many beginners lose because they always want to cover up traders who previously failed and do it continuously until they lose a lot of money.

So, it is true that maintaining psychology is very important in helping traders become better at facing the challenges that exist in the financial markets and achieve success in the long term. I liken trading to the retail world, where there are harvest periods and lean periods, for example selling clothes, market crowds will increase during weekends and big celebrations, that's the time to make transactions/sell as many goods as possible for more profit but still prioritize the risks. and reasonable margin limits. Just like trading, where there is important news that can move the market in a big way, that's where you can carry out as many transactions as possible by prioritizing risk and a reasonable margin threshold... so the point is to treat trading the same as if you were selling retail.

[GbitG]

You have shared some good tips, but these seem not to be enough for most of the newbies who start their journey in the crypto field by trading in some pairs. About which they have heard from some YouTube or TG channels. And at the end, they lose all the funds they have invested in that coin. Others who don't do this simply follow their guts and try to become cool and think they can judge the price of a token by just looking at the charts and making some assumptions and can easily time the market.

That's the definition of trading psychology. People are doing it, and they don't even know about it. People don't even know what factors they should care about or what important things they should follow. Like they must have a backup plan. They should not invest all of their funds at once, instead, they should diversify.

Because by diversifying people get to make more profits, and after that, they should make some plans to make a profit from a token. They should invest in what they can bear the pressure from the market. They should not become greedy after seeing some profit or lose.

[Bananington]

Be Focused

It is easy to loose focus of what is important when trading. Making money which is the aim of being a trader is a good thing to have in mind as end result, but your focus as a trader should be faced on executing the strategy that you have formulated and executing it to perfection that you are then able to make profit as reward for the good strategy used. Traders who focus fully on making money instead of strategy will not enjoy the process of trading which is meant to be enjoyed and will not be able to easily observe when a strategy that they use is no longer as effective as it was.

[hd49728]

Utilize Risk as a Tool (Leverage Risk)
You must understand that risk is an integral part of trading but can be used as a tool at minimal levels. Readjusting your stop losses and incurring losses in a bit to reduce your loss isn’t an ideal approach. After a proper setup involving a moderate risk management, allow for trade to play out as most times, we incur the losses we are avoiding when we go readjusting our stop loss.

When you use leverage, you take bigger risk. When you face with risk, your mentality will become less stable. When you cope with bigger risk, your emotion will become more chaotic and as psychological effects, you will make more bad decisions which are affected more by your emotion and uncertainty as well as fear that you will lose money by bad decisions.

In fact sometimes you make good decisions and open good positions, but your fear and uncertainty force you to close your position, exit it before you can take profit. It is not worst. The worst comes when you miss profit, you open next positions more emotionally and then actually end them with losses.

[Don Pedro Dinero]

Utilize Risk as a Tool (Leverage Risk)
You must understand that risk is an integral part of trading but can be used as a tool at minimal levels. Readjusting your stop losses and incurring losses in a bit to reduce your loss isn’t an ideal approach. After a proper setup involving a moderate risk management, allow for trade to play out as most times, we incur the losses we are avoiding when we go readjusting our stop loss.

When you use leverage, you take bigger risk. When you face with risk, your mentality will become less stable. When you cope with bigger risk, your emotion will become more chaotic and as psychological effects, you will make more bad decisions which are affected more by your emotion and uncertainty as well as fear that you will lose money by bad decisions.
<...>

Not only that, but the higher the leverage, the lower the percentage of traders who consistently make money. In other words, by using leverage you get closer to a 100% probability of failure and the more leverage you use, the closer to 100%. Let's see without leverage, only day trading:

“95% of all traders fail” is the most commonly used trading related statistic around the internet. But no research paper exists that proves this number right. Research even suggests that the actual figure is much, much higher.

As I say, add leverage and you'll be close to 100% failure rate.

[hd49728]

Not only that, but the higher the leverage, the lower the percentage of traders who consistently make money. In other words, by using leverage you get closer to a 100% probability of failure and the more leverage you use, the closer to 100%. Let's see without leverage, only day trading:

Being a successful trader is hard and most of traders fail to do it. By saying successful, I mean it must be verified through a long time for trading. We can not look at a trading history of one day, one week and say that trader is a successful one. It can be temporary success by luckiness and when a market moves with a same thinking of that trader. Verify a trader and a trading history need a longer time, like few months, few years because the market will have some big turning points to kill bad traders. At such points, temporary profit will be taken away quickly by market.

“95% of all traders fail” is the most commonly used trading related statistic around the internet. But no research paper exists that proves this number right. Research even suggests that the actual figure is much, much higher.

As I say, add leverage and you'll be close to 100% failure rate.

I know about that high percent of failed traders. Thanks for quoting and I agree with you that using leverage, futures trading will increase risk and probability to become failed trader.

[Franctoshi]

I

Not only that but the higher the leverage, the lower the percentage of traders who consistently make money. In other words, by using leverage you get closer to a 100% probability of failure and the more leverage you use, the closer to 100%. Let's see without leverage, only
As I say, add leverage and you'll be close to a 100% failure rate.

That is what most traders who lost money don't understand,  This was practically what I was doing using a high leverage to trade when I started up as a newbie trader,  Actually non of those trades was in the money, sometimes I fuckinly increase the leverage to 50×,  and that was the worst time in my trading journey and the market fucked with me, got screwed back to back until I learn.

To be more profitable, Simply apply lower leverage be patient, and ride your account up slowly if have a working strategy.