Psychology in Trading

Psychology in trading is all about managing the trader’s emotions. This is one of the leading causes of losses in trading. Trading exacerbates emotions, revealing ones true nature. The psychological risks for the trader are numerous and it is important to be aware of them in your trading. You must learn to manage the lure of gain, fear of losing, frustration, anger, stress, euphoria, addiction, etc. If these emotions are not managed, they take over your trading and your decisions become irrational. This inevitably leads to the loss of capital through the misuse of leverage.

Psychology in trading is one of the pillars of success in the financial markets, as is money management and trading strategy. A lot of authors have studied the subject of behavioural finance. Using a demo trading account does not effect emotions very much since there is no money at stake. On a real account, your emotions will be multiplied tenfold and you will need to have iron discipline in your trading. Fortunately, there are different techniques for controlling your emotions that you can learn so that you can deal with them when trading. This is what this section, dedicated to the psychology of trading, offers you. If you want to become a trader, this is an essential step in your learning.