The Trading Psychology That New Traders So Often Overlook

The Trading Psychology That New Traders So Often Overlook

The Trading Psychology That New Traders So Often Overlook 1024 546 Steven Dux

Trading is all about numbers and getting access to the right data, most traders forget about a fundamental aspect that can make or break your trading career.


…of trading is frequently disregarded by new traders, but it shouldn’t be because it plays a fundamental role in your success.

It’s important to learn about all the skills and techniques you need in trading too, but you cannot forget about the psychology that goes into executing successful trades. This can be the difference between success and failure in trading. It determines how you manage your emotions and helps you remain disciplined at all times. In today’s piece, we will discuss and elaborate on how psychology plays an important role in trading and should always be kept in mind. We will cover the 4 major points that are the most important in trading psychology and some suggestions for beginners looking to make a mark in this industry.

The fact of the matter is, you, like every other human being, are imperfect. You have emotions and you sometimes make decisions based on your frame of mind as opposed to the facts. You get nervous, uncomfortable, reckless, and brash. You make mistakes.

We as humans have certain biases and perceptions based on our environment and nature. Which begs the question: If trading is based on numbers and facts, and the market condition remains the same for everyone at any given point of time, why is it that 94% of traders failSimple… it comes down to psychology! 

The key to success in trading is a

shift in mindset

Traders who are aware of their own biases and perceptions are able to shift their mindset to suit the field of trading. They have better chances of making more and more profitable trades. They also manage to keep their losses minimal.

“We are what we are because we have been what we have been, and what is needed for solving the problems of human life and motives is not moral estimates but more knowledge.”
–Sigmund Freud

One of the best things you can do to help your new trading career is to become aware of your own biases and emotions. It’s important to study how you deal with different situations and how you can improve it. Your reaction to situations that will inevitably arise while trading will determine how easily and how fast you’ll get to the point of success. When you figure out your inherent ways of dealing with various situations, you’ll become more aware of what you can do to plan your trades better.

Have a plan

Having a plan in place helps you keep your emotions and reactions in check.

As an example, if you’re a person who gets impatient quickly, you’re prone to cover your losses too quickly. If you’re naturally an anxious person, you might let fear rule your decision-making. If you tend to get impulsive, you might be prone to make bad decisions that will lead to losses. Since our emotions, biases, and perceptions are so ingrained in our psyche, it is not easy to remove them from your professional life. That is true for trading as well. Your psychological mindset is bound to have an influence on your trading. That is the nature of the human mind.

We are not robots, after all. We cannot completely remove emotions from our day-to-day life or avoid their influence.

So, what can you do as a trader to minimize the influence of emotions on your trading? You will need to have an honest conversation with yourself about your own psychological makeup. Use what you can as a strength and work on your weaknesses. Some of your personal traits can work positively, but some will have to be worked on. Once you acknowledge these things, you’re able to figure out what to do to plan accordingly. You’ll make decisions more consciously and confidently 

Having a plan is a good way to keep negative emotions at bay. It acts as a roadmap for you and your trading.

Psychological trading traits

4 important psychological trading traits to build this roadmap:


Trading confidence

When traders first begin to make trades, one of the biggest psychological challenges they face early on surrounds confidence.

I struggled with this too, when I started out 5 years ago. What happens is that you either start covering too early or cutting losses too slowly, either of those extremes can be detrimental to your profits. This happens due to a lack of trading confidence when you first get started, as you’re still learning the ropes. You make these mistakes even when you know a pattern is going to work out and will provide the maximum reward. The way to handle this struggle is to track enough statistics. The minimum samples per pattern you track should be 100. It’s also important not to track everything at once, but instead divide them into categories and track them like that.

Watch the statistics videos on my Youtube channel to learn how to track statistics the right way. Check out this one on Entry Level Stats Tracking.

While tracking patterns, make sure you’re focusing on 1-2 patterns only. In fact, ideally, just focus on one.  If you’re anywhere between $3,000 to $30,000, try and stick to tracking one pattern at a time and give it your whole focus. This approach works because it ensures you’re not risking too much, meaning your trading confidence doesn’t get beaten down.



Fear of missing out is one of the most common mistakes every single trader makes.

I did, too. Many times. It is very common to feel FOMO when there is hype surrounding a certain trade. You see it doing well and everyone is buying it so you feel you must too or you will miss out. This isn’t good. All that happens is that you will play your cards blindly without enough research. Or, you missed a trade and now that you’ve missed that profit, you want to increase your size on the next trade. To make that money back. It’s a common feeling that somehow the money must be earned because the market now owes you. That is one of the worst outlooks to have while trading. If you find yourself with this sort of trading psychology, that’s when you need to go back to basics.

Start tracking statistics in two different ways.

Frequency of the occurrence of the pattern

The average return on the pattern

This will help you figure out how much you can potentially gain per year. Once you know how much money you will eventually make, the effects of FOMO disappear. It provides a vision for you, gives a sense of security, and ensures you’re not shooting in the dark. It has worked out really well for me and I’d recommend you adopt it as well. Patience is essential for success in trading and there’s no room for emotions like FOMO.  


Focus on outcome

Everyone has their own journeys and destinations in life, and as a trader, it’s important to remember that.

It’s easy to get into an endless loop of comparing your trades to other people’s. You’re browsing social media and seeing traders with various levels of experience posting about their gains, making a ton of money. You’re just starting out, so comparing your gains and losses to other people will only make you feel insecure (and lead to more FOMO). You start to focus on how much you want to gain rather than how you will get there. If you’re focusing on how much money you’re going to make, your focus is on the results rather than the process.

Focusing on the process, gaining experience, and tracking statistics will make you a good trader. Focusing on the result will get you nowhere. When I’m trading, I don’t look at my potential profits so I don’t really know much I’ll make in the end. I focus on pattern development. That’s all that matters.

It’s understandable that this is hard because making money is mainly what motivates most people to start trading. That is the goal, yes. But the process needs to be your sole focus.


Emotional limits

Yet another downfall of comparing yourself to others is succumbing to emotional limits.

Let’s say you’re trying to emulate the success of an experienced trader by playing with the same amount of money they did. If they’re sizing to $50,000, you want to match this, thinking it’ll get you the same amount of success and profits. So you look at what their entries and exits are and try to follow their footsteps. The thing is, $50,000 might be your entire account. But for them, it’s just a small part of their account. As such, the results between the two of you are completely different because your risk levels aren’t the same.  

They are able to be patient and hold on for a little while, whereas you cannot do the same because the risk involved is just too high. A situation like this leads to fear, worry, and it can cause you to slip into the worst kind of trading psychology where you base your decisions on your emotions (the feelings you are feeling at the moment). Whereas their state of mind is completely different, so the results will be, too. The way to handle this is to figure out your own emotional limits. Test it yourself and find out what level of risk you’re comfortable with. 

I practice at least 20 times per size before I change it. Once I’m comfortable with one size, I increase it 2-3% each time.

1 comment

Leave a Reply


    Insert your name and email address to apply now!



    If you’re new to all of this and have limited knowledge as to how the stock market works, I highly recommend you invest in The Freedom Challenge.