Trading Psychology: Control Your Emotions While Trading

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Trading Psychology: Control Your Emotions While Trading

What is trading psychology?

Trading psychology influences the market behavior which in turn affects your trading performance. Aside from the technical aspects like entries, risk management etc, the most important thing is your psychology when trading.

Although, you might be an experienced trader with good knowledge and trading skills, never let your emotions control your decisions. In order to be successful trader, you must recognize and control your emotional tendencies such as fear, hope, anger, impatience and panic.

These all happening during different times. For example, traders are afraid of losing funds during a serious market fall which leads them to liquidate their holdings and stay away from opening new positions. By yielding in these emotions your judgment becomes clouded and therefore you will be unable to make more effective trading decisions.

Most traders spend a lot of time and energy worrying about which direction the market will go whether they will make a profit or loss, leading to a lot of stress and wrong buy and sell decisions consequently.

How to Control Your Emotions While Trading

Here are few ways to have the right psychology of trading like a successful trader that will increase the probability of your success in the stock market.

Do not be over confided

Overconfidence in your trading knowledge can give you the false impression that your views and decisions are always correct. Successful traders are careful not to fall into the trap of their own biases, opinions and market views. Instead, they keep a trading dairy to record all of the trading activities.

The trader writes everything in a diary, such as losses, profits, trends and of course decisions whether to buy, sell or keep. This helps to analyse the decisions after a trade session is closed and examines what worked and what didn’t. It allows the trader to assess his trading decisions and helps to trade mindfully in the future and improve the performance and profitability of his trades. After that he clearly can see what worked and what didn’t worked. Additionally, he can evaluate this trading decisions and trade cautiously in the future.

Learn from Mistakes

Successful traders succeed because they can accept their mistakes. Unlike traders who give up after a few losses, successful traders use their losses to their advantage. He analyzes his trading activity to understand his mistakes and applies what he learns to future trading. Definitely, the right psychology does not always guarantee profits but always distress things when he is in panic!

Balance Trading Risks

It is important to balance trading risks even when there is no meaningful opportunity. Such traders cannot resist the temptation to play in the market and lose money.

However, successful traders understand that protecting capital rather than maximizing profits is the key. Maximizing profit can only be achieved only when the capital is protected. Traders know when to stop losses to protect their capital and following a disciplined trading plan to balance risks and minimize loses.  A successful trader clearly knows when to trade and when not to trade as he is trading cautiously.

Trading Habits

A trader also follows trading habits such as:

  • They develop a trading plan and follow it. It doesn’t mean that it will guarantee profit but can minimize losses.
  • They do not make a shortcut from a trading plans. This helps develop self-discipline in long-term profitable trading.
  • Trade only what you can afford without the risk of losing money.
  • Accept the risk of loss in every trade you take and make sure the potential rewards are worth the risk of loss. Be prepared to close the deal if you believe it.
  • Focus on the overall performance of the trade not the losses.
  • Do not only think the profit. Participating in high-value trades with the prospect of big profits is often very attractive but, this can work against you and consequently cost you a lot of money.


Trading psychology is very important if you want to become a successful trader. While nothing guarantees that you will maximize your profits, it is vital that you start following a plan and habits for successful trading sessions.

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