The Psychology of Successful Trading

The Phycology of Successful Trading

The phycology of successful trading is 80% psychological and 20% methodical. As I have said in the past, self-knowledge is the key to market success. A trading method by itself, no matter how well thought out, cannot be successful if it is not applied in the correct manner. It is in the application of a trading method that many traders end up losing. Consider the analogy of a high performance machine. No matter how aerodynamic or technically advanced, it needs to be controlled by a human. An advanced piece of engineering such as racing car needs to be driven by a person who can drive it with care.

What does discipline mean?

Just as a disciplined driver is needed to race a car, a disciplined trader is needed to apply a trading method. All traders have heard the word “discipline”, but few really understand what it is and why it is so important to develop it.

The phycology of successful trading is what separates winners from losers? The answer is not just knowledge of the trading environment, but also an understanding of our personality make-up and how it needs to interact with the market in order for the trader to emerge with consistent profits. Learn why an understanding of our own personality is the key to successful trading, and how the emotions of greed, fear, pride and hope are fatal to trading success.

The phycology of successful trading is based on our intelligence, knowledge and talent have to be applied. Any person who is successful knows that application requires discipline, self-control and confidence in one’s abilities. We are all put in situations where, after they have occurred, we look back and feel that if only our emotional control had been better. You are going for a job interview and role-play with a friend beforehand. You come over as assertive and confident. In the interview itself, however, the confidence goes. You practice a best man’s speech, it how well and sounds great; however, on the day, delivery suffers as you feel nervous and shy.


Trading is no different.

As soon as money is committed, logic can go out of the window and basic emotions take over. Consider the difference between paper trading and trading real time. Whilst paper trading, you earn very good profits, you are confident and optimistic. You see a very lucrative business opportunity, so you now decide and trade for real.

To develop discipline you need to acquire total confidence in your abilities, to acquire self-control.

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