A Guide to Trading Psychology - TopAsiaFX

030, Aug 2021

TRADING PSYCHOLOGY: BEYOND THE BASICS

The psychology of trading is often overlooked but forms a crucial part of a professional trader’s skillset. Keep reading to discover their top tips, and to learn more about:

  • What is trading psychology 
  • How to get in the mindset of a successful trader 
  • The basics of trading psychology 
  • Trading psychology tools and techniques Learn more about the realities of trading in our ‘Day in the Life of a Trader’ videos.


WHAT IS TRADING PSYCHOLOGY?

Trading psychology is a broad term that includes all the emotions and feelings that a typical trader will encounter when trading. Some of these emotions are helpful and should be embraced while others like fear, greed, nervousness, and anxiety should be contained. The psychology of trading is complex and takes time to fully master.

In reality, many traders experience the negative effects of trading psychology more than the positive aspects. Instances of this can appear in the form of closing losing trades prematurely, as the fear of loss gets too much or simply doubling down on losing positions when the fear of realizing a loss turns to greed.

Advertisement

  Real-Time Signals One Click Away - Starting $30

 

One of the most treacherous emotions prevalent in financial markets is the fear of missing out or FOMO as it is known. Parabolic rises entice traders to buy after the movie has peaked, leading to huge emotional stress when the market reverses and moves in the opposite direction.

Traders that manage to benefit from the positive aspects of psychology, while managing the bad aspects, are better placed to handle the volatility of the financial markets and become better traders.

THE BASICS OF TRADING PSYCHOLOGY

Managing emotions

Fear, greed, excitement, overconfidence, and nervousness are all typical (continue reading with DailyFX).