Minds and psychological trading are very essential to bring successful traders. In trading on the financial markets, it is not just an investor who learns trading fundamentals and technicals. The non-technical factor called trading psychology strongly supports the success of a trader in the financial market.
Knowing the minds and psychology of trading consists of controlling emotions and discipline in implementing strategies, money management, and risk management. And the most important thing is to control fear and greed.
Contents
Understanding minds
Minds reflect what is in our minds, in trading. The role of minds can lead to trader behavior in building habits in trading.
A negative mindset towards forex trading and thinking that forex trading is just luck can cause traders to make decisions based solely on luck.
A negative mindset will only encourage traders to put aside rationality in doing analysis and be reckless in every trading action.
It is important for a trader to know their own mind. By recognizing our minds, we will be able to adjust which trading strategy is the most favorite trading system.
Trader mentality
The mentality is an important part of trading psychology, it relates to one’s courage in making decisions. A trader who has a strong mentality can make decisions with confidence without any fear.
The trader mentality is built on trading knowledge and experience. The more a trader has a broad knowledge of trading, the more mentally strong he is. Long trading experience, can be a training in building a strong trading mentality.
A strong trading mentality can make a trader highly dedicated to developing his business and trading. All traders may have fallen. But not all traders who fall can get back up. many eventually leave forex and never come back.
In contrast to traders who have a strong trading mentality. Falling or failure is just a valuable lesson and learning to get up again.
What is psychology trading?
Psychology refers to the emotional state, mental health, and behavior of a person related to personality and habits. Trading psychology is an insight that studies the influence of emotions, and trader mentality on trading.
When a trader makes easy profits, their minds can influence emotional behavior in the scope of psychology. He will find it very easy to make a profit, which can lead him to become overconfident. Which is the impact of thinking it’s easy to profit from trading.
If you can’t control your psychological condition in maintaining emotional stability, overconfidence can drag traders into reckless and greedy opening trades. It will be a big problem when negative minds manage to control their psychology. Which will encourage him to take action out of a rational mind.
Why does psychology trading matter?
Minds and psychology trading is one of the key points to forming a successful trader. Why psychology matters in trading are because a trader’s decision to make a trade, either buy or sell, is the result of a greedy impulse that makes him take risks.
Conversely, when fear is more dominant in the trader’s psychological environment, this condition can prevent traders from taking risks.
Fear and greed become two opposing emotions in a trader, and in the end, the mind will determine a final decision
And here is the problem, as explained earlier, building a positive mindset can lead traders to make decisions based on the rationality of thought. On the other hand, a negative mindset can lead traders to make decisions based on recklessness to the exclusion of rationality.
How does psychology affect trading?
Broadly speaking, the psychology of trading is split into two main categories, fear, and greed. Because the scope of trading psychology is narrower than the scope of human psychology.
Human psychological condition, some divide it into two emotions, good and bad. But more specifically, there are four kinds of lust that represent a person’s psychology. And there are other opinions categorized into eight categories.
In Javanese philosophy, lust is divided into four categories, namely biological or “Lauwamah”, worldly or “Supiah”, emotional or “Amarah”, and spiritual or “Mutmainah”.
- Specifically, Lauamah means emotions related to the fulfillment of the need for food, drink, and sexual desire.
- Supiah, means all emotions related to worldly love, such as wealth, rank, beauty, position, and wanting to get praise.
- Amarah, means the emotion of anger that causes people to act blindly without using rationality in action.
- Mutmainah means good emotions that encourage humans to do good, closer to God with an orientation of peace of mind.
In trading, the emotions that are often carried are those related to Supiah, Lauamah, and Anger.
Traders join forex with the aim of making money, money can be used to meet the needs of food, and drink. Another reason is wanting to get rich from trading, big money, or financial freedom. But in practice, often in trading, emotion or anger plays a role.
It is rare for traders to join trading because they want to get peace of mind. Because spiritual lust is closely related to the soul and discards all worldly things. Someone with high spirituality, usually uses wealth for virtue, whereas with the goodness he feels he gets peace of mind.
How do you control psychology while trading?
How to control emotions in trading psychology is very important. Each trader may have their own method of trying to control emotions in trading psychology.
Some of the following tips may be able to provide a little enlightenment for controlling emotions in trading.
Tips
- Have the main source of income or a main job. Relying on trading will only make your minds depressed because of the targets that you have to meet for daily needs. By having a primary source, your trading will be more rational without the burden of targets to be achieved.
- Don’t think you can get rich from trading. Most traders come into the forex industry because they want to get rich, buy a sports car, or a luxury house. Such a mindset can have an impact on the way your trading becomes irrational with mathematical calculations to achieve the target. While forex is also about the risk of loss.
- Develop your strategy, how to enter, calculate money management, and risk management. Trading success is determined by strategy and market conditions, create a trading plan rule that minimizes mistakes.
- Measure your discipline rating. You can keep a journal with notes, if you manage to be disciplined with the trading plan, give five stars, if out of the trading rules, give one star. You can try measuring success ratings to practice discipline.
- Have a savings reserve for household needs in a year. Forex trading is still risky, don’t rely on everything from trading. There is no guarantee of profit in trading. Without having a savings reserve, the burden of thinking becomes heavier in trading.
- Get side jobs for additional income. The forex market is open 24/5 days a week, don’t worry you will lose opportunities, by having a side job, trading is not the main source and you are more comfortable.
Build a strong trading psychology
How to make strong trading psychology has always been an interesting problem faced by traders in the financial markets. Often strong psychology becomes biased due to changing trading situations.
The previously intended built discipline can easily be dispersed due to different situations. Then how do build strong trading psychology?
The relevant answer might be to go back to establishing a positive mindset about forex trading. Make trading a learning investment. Here traders learn how to manage trading risks. build a strategy with discipline on trading rules.
Plan a trade
Before starting an entry, make a trading plan emphasizing the entry strategy, stop loss, and profit targets. Include in the trading plan the maximum amount of risk in one round of the trading plan.
Complete one round of the trading plan
Before starting with the second trading plan, make sure you complete one trading round on the previous trading plan.
Evaluation of trading results
You can repeat several trading plans with the same trading plan for several rounds. Continue to evaluate the results of each trading plan and learn to make optimizations of new trading plans and strategy settings.
Say in the first trading plan you set a target of 30 pips, but stop losses are often hit before profit, you can try lowering the target to 20 pips and see how the plan changes.
Avoid revenge
Don’t force yourself to be rich. Trading on the CFD market with leverage is always risky. That is why forex is an investment product in the red product category.
More than 69% of investors lose money in the CFD market. Realize that this is an early warning, if you lose money, avoid revenge.
Don’t rush to replenish your account and start new trades without paying attention to your financial condition. Learn from others who have bad experiences of depression due to bankruptcy in trading.
How do I get my mind right to trade?
To be able to drive your trading mind, quality is inseparable from your discipline in carrying out a trading plan. A strong mentality is the main weapon to be able to drive minds in trading.
That is the importance of understanding your own psychological state so that you can adjust a trading strategy that matches the mental strength of a trader’s psychology.
Final thought
Humans have a basic nature related to the desire for something. Basically, most humans become greedy because they always want something that crosses the line. This means that after completing one wish, another desire appears in front of him.
However, human desires are limited by limitations, not all desires can be achieved. If anger is predominant, the action tends to be destructive rather than correcting. But if you have a high spiritual soul, the desire that is not achieved is not a sad thing. He will remain open minds and accepted as a lifeline from God.
Note: this article is for informational purposes only and is not investment advice or solicitation. CFD forex and crypto are risky. Each investor is responsible for their investment.
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