Today, we continue exploring trading psychology. Many traders start their journey in the financial markets while still keeping their regular jobs. This is a reasonable decision since it’ll take some time to get into the profession. You need to learn the ins and out of the market analysis, set up and test your own trading strategy, as well as figure out how to manage your own emotions.
In this article, we shall discuss how to become a market player who earns consistently as easily as possible. To do that, let’s approach this matter from the psychological standpoint.
Trading in the financial markets is seen as a way to make big money regardless of the market situation. However, the first thing you need to do is to learn.
If you’re just getting started, it’s tempting to get the hang of it all right away. But that’s not how it works. The surest and fastest way is to take steps systematically.
1. Decide on how much time you wish to spend on your trading education. If you work every day, it can be one hour in the morning or two hours in the evening and three more hours on weekends. Set a comfortable schedule for yourself.
2. Decide on when you can trade, taking into account your daily tasks. For example, you can do market analysis and place pending orders at the beginning of the European session and manage evening positions at the end of the working day. In addition, you can scalp for two hours a day.
3. The secret lies in consistency. By taking small steps regularly, you won’t get exhausted, while being able to acquire the necessary knowledge.
First things first, you need a plan. The point is, there is a huge amount of information about trading. And if you undertake to approach it chaotically, you'd experience information overload rather than learn how to make a stable income. So, before you start your journey in the financial markets, you should decide on what you need to learn and focus on it.
On the surface, your path from a beginner to a professional trader may seem very simple and unexceptional. You need to learn the basics of market analysis, money and risk management, as well as create a trading strategy (use a ready-made one or develop your own).
So, why do so many traders fail to make money on the exchanges? The answer is to be found in the trader’s psychology. As practice shows, the majority of the mistakes aren’t about the lack of knowledge but your emotional problems.
Mohammed Ali once said, “It isn’t the mountains ahead to climb that wear you out, it’s the pebble in your shoe.” If you identify the psychological reason that forces you to make mistakes all the time and eliminate it, it’ll be easier to do the “technical” part.
Why do two traders who use the same strategy experience different outcomes—one makes money steadily while the other loses all the time? Why can a trader increase the deposit from USD 1,000 to USD 10,000 and then send it all down the drain? Why can’t traders just trade according to the checklist they created?
The answer suggests itself. There is this “pebble in your shoe” that doesn’t let you reach the top. These can be fears (everyone has them), or some limiting beliefs stored in your subconscious mind.
How can you discover them? The fastest way to do that is to see a psychologist. Professionals offer specialized techniques to help you get to the bottom of this problem, identify the culprit of your self-sabotage or failure, and fix it.
If you’re willing to figure it out on your own, ask yourself the three following questions:
1. What fears hinder my trading? Discover them and fix it. For example, everyone is afraid to lose money but it can serve as the self-preservation instinct prompting you to place stop-loss orders or as sabotage that causes a brain freeze before you enter the trade and force you to overstay unprofitable positions.
2. Do I have negative beliefs about money? For example, earning more than my friends and family is seen as indecent. Money is evil, etc. If you discover that you have such damaging beliefs, they’ll need to be replaced with positive ones. A psychologist can help you diagnose them and remedy the situation.
3. Do you have a negative attitude towards yourself? For example, “I won’t succeed”, “I’m a failure” and “I always lose money.” If so, you’d better look for positive examples of those who succeeded. Find a mentor who will help you get your first wins and turn this scenario into “See, I actually CAN do it!”