What is the trading psychology edge? Do I have to take a trader psychology test? What has psychology got to do with trading crypto? – EVERYTHING
It doesn’t matter what sort of trader you are or what market you trade, psychology will play a massive part in your success. If your head is not in the right space for trading I guarantee you will lose. Every market is driven on fear and greed you need to learn to control your emotions if you want to make money from the market. Trading crypto does not have to be hard, in fact, the way I trade is simple, putting it all together and having the right psychology to trade successfully is not that easy. Let’s have a chat and see what the trading psychology edge is all about.
Fear & Greed
Greed is usually described as an irresistible craving to possess more of something (money, material goods) than one actually needs. Greed = Buy Buy! BUY !!
The emotion of fear is usually characterized as an inconvenient, stressful state, triggered by impending peril and awareness of the hazard. Fear = Sell! Sell!! SELL!!!!
“financial markets are driven by two powerful emotions – greed and fear.” so the old Wall Street saying goes. Have a look at Wikipedia for an interesting take on Greed & Fear ….. See how it relates to the markets, interesting hey.
Keeping Emotions in Check
Trade what you see, Not what you think. I love that statement, I printed it out and pinned it on the wall behind my trading screen. This is a real photo that I took while writing this article that is how important this stuff is to me. I keep it there and read it every day like a ritual before I start my morning scan of the market, that is a part of my trading plan. I use it to remind me of those important things before I trade – Every day!
Why, because it helps me to be mechanical in my decision-making, by that I mean I can make decisions based on fact without emotions coming into it. Now don’t get me wrong, I am not a machine, emotions will always come into it, I am only human right but what I am saying is you need to learn to keep your emotions under control.
If you trade with the wrong emotions it will not end well, you need to make clear decisions based on facts not feelings. As soon as you let emotions creep into your trading you are setting your self up for a loss.
Fear & Greed
I have done it myself, I have blown up a few trading accounts letting fear and greed get the better of me. You know you place a trade on a perfect setup, watch it just about hit your profit target and then turn around and smash your stop loss. Then the next trade you get an even better setup so you risk a little more on this one, you know so you can make a bit more back from the last lost.
What happens, you get smashed again but now you have lost more because you risked extra, you get mad/angry at the market, you think it was a perfect signal it should have worked. So now you start to look for trades that are not even there, you want to trade just so you can get back at the market because you have to make up for that loss.
Sound familiar, I think anyone who has traded has been there at some point. You need to understand that the markets can do anything at any time and accept this. I now have rules in my trading plan that if I have a certain amount of loss in a certain time I stop trading. If I feel tired I do not trade. If I feel sick I do not trade. If I have other stuff going on I do not trade. Why – because all these things will stop me from making good decisions. Your head Must be in the right space when trading.
Develop a Wealthy Mind
It takes work to develop a wealthy mind, for me anyway. It is more than just reading positive quotes and following my trading plan. I need to constantly work at it, that is why I have that piece of paper stuck to the wall above my trading computer because I need to remind myself of this stuff.
I have recently started to use a routine as well and have also started using meditation, all these things help me to trade from a better place. This way I trade with my checklist also help with this and also ensures I don’t miss something important.
Like I said the way I trade is simple but not necessarily easy, I need to constantly work on the discipline and psychology stuff. It does not matter how good you think you are you will need to work on this to some degree if you want to be a long term trader, it may come easier for you or you might have to work hard on it like me but it Must be a part of successful trading.
I was lucky enough to learn about Mark Douglas early on in my trading career. I bought the book Trading in the Zone because it was a must-have book, at the time I think I was trading options. I skimmed through the book and thought yeah yeah I know this stuff. Fast forward 10 years and I actually read the book this time – WOW. It just made so much sense to me this time, all I can say is – it is not a must-have book, it is a MUST READ book.
Routine & Discipline
So you thought you could just open an account learn a strategy and make a few bucks, well you can and you might have but if you haven’t got it ALL together you will not be around long term. One of the worst things that can happen to a new trader is having a few wins on bad trades. Guess what, then they start to place bad trades because they have formed bad habits and it doesn’t work. They blow up their bank and stop trading, blaming everything else except for themself.
You need to have a good routine in place and be disciplined to be a long term successful trader. You must keep records of your trades, you must review your trades. I take screenshots of every trade I place and also write comments on them so when I review them I know what I was thinking when I took the trade. Sometimes I will mark a trade as a good loss.
Yes, you can have a good loss. It is when everything in my system/strategy was right but the trade didn’t work that is a good loss. A bad loss would be when I broke one of my rules or missed something when I put the trade on and it was a loss. You can only pick up on this if you keep good records. No, it is not the fun part of trading for me but it is necessary for success.
So for me having the trading psychology edge has meant I have had to learn a lot about myself. You can dismiss all this stuff and think it is crap but any real successful trader uses it, that alone is good enough for me.
It has meant I have had to implement a routine, I have had to read some books, I have written some rules, I have learnt to be present, I have to be disciplined but for me, it is all worth it. Your routine might be a lot different from mine you might be a lot more disciplined than me, but no matter how good you are you will need to work on your trading psychology. If you have any good ideas or suggestions related to trading psychology or just want to let me know what works for you write a comment below or drop me an email at firstname.lastname@example.org and remember…………
Be the Best you can Be
❗ DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.