Whether you admit it or not, psychology plays a huge role in your daily trading. Every day we make hundreds of decisions that we do not actually have control over — our brain uses autopilot programs to help us navigate through the world. Most of the time it is actually a good thing. Life would be exhausting if we had to think about every breath or every step we take when we walk.
However, these programs can take charge of our decisions and actions in moments, when it is unfavorable for us. For instance, there are many trading decisions that we make under the influence of these reflexes. Let’s see how this may impact the trading approach of traders.
1. Fear of loss
Losses are a natural part of trading and every trader knows that. However, many traders are so afraid of it, that in their attempts to avoid it, they start acting irrationally. For example, some traders keep a losing deal in hopes that it will reverse. In the end they close it with an even bigger loss than before.
In a trader’s mind, losing is a very big deal and he or she should do their best to turn a loss around. This is part of our nature: fighting an outcome that is bad for us. In reality, losing is a normal part of a learning curve and it is important to be able to deal with an unprofitable outcome.
However, when traders stick to their trading plan and utilize risk management tools every time they trade: setting stop loss and take profit levels, as well as planning trade exits, then it can be manageable.
2. Accessibility bias
Our brain is wired in a way that makes us believe our latest experiences to be the truth. While often the knowledge that we have immediate access to is not accurate, instead of doing careful research, we take whatever our brain tells us for the real thing.
For instance, many traders suffer from their own experience. They find a strategy or an indicator, and try to implement it in their own trading. However, instead of generating an outcome, they lose their funds several times in a row. Their brain tells them that this strategy or this trading instrument simply doesn’t work. Is the strategy really bad? It might be. However, the trader doesn’t actually know it: their brain just tricked them into assuming this.
The thing about personal experience is that even though it is the most accessible knowledge we have, it is based on a very small amount of data. Until the necessary research and testing is done, relying on the most immediate experience might be harmful.
With that said, it is important to be able to drop a strategy, if it does not work for you. However, make sure to test it out thoroughly on the Practice account before you consider it useless.
3. High expectations
This involves expecting outcomes, but without any real trading approach. Traders expect the circumstances to fall in place and generate a favorable result, without any effort from their side. It is very easy to look at the chart and notice hundreds of good entries that one could take in hindsight.
In reality, however, positive results can only be achieved with the necessary analysis. There are dozens of different assets, among which a trader has to find the right one, and after that decide on the correct moment for an entry and exit.
Another expectation that many traders have is receiving a truly big return every time. High outcomes are rare and traders need to tame their excitement and look at the situation rationally. Set your realistic goals and try to follow them closely, instead of getting impatient and greedy.
Conclusion
As you can see, our brain definitely plays a huge role in every part of our life, including trading. While it might be hard to escape the familiar patterns, even a small conscious effort has the potential of improving your trading approach.
To the platform
Interested in trading but i have no
knowledge
Hello Helen! How are you doing? IQ Option is a trading platform where you can start your journey as a trader.
You can learn how to trade on your practice account.
You can find more tutorial videos on our trading page.
Does IQ Option pays real money?
Hello! Yes, of course, it does 🙂
Thank you so so much.
You’re most welcome!
Wao, nice info, discipline makes perfect to keep out blowing your account. Becoming master of loses increase our knowledge.
Thank you for your feedback, Berns
nice content Tatyana..
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If everyone knew early how to read institution order flow & order block then many would take less time on the journey of losing money .
Thank you for your feedback Ricky 🙂
Today I’d lost what I won on this Thursday morning. I have no idea what is going on today. All the strategy which I use is not working. Fortunately my capital and small profit is still safe. That’s mean today and tomorrow I need to take a rest. Hemmmmmmm. Still feel regret to the decision that I made.
Thank you for reaching out. We would like to chat with you regarding your experience with us. Could you contact us at support@iqoption.com? Thank you
So sorry about your lost.
I am still a novice in the platform, I have lost some amount of money in the cost of my trading but at the same time, I have learnt some lessons and how the platform works.
Another work I need to do for myself is GREED and FEAR OF LOOSING. Please if there’s any means to get rid of these two.
I would be glad to know.
Hello Chisom! Both of these are psychological, as mentioned in the article as well. It is only in your hands how you overcome the fear of loosing and overcome the greed. Always give sometime and do proper analysis before placing any trading, this will create more room for thinking.
Just recently, I realized that it’s not about my technical and fundamental biases, rather it’s about what the market is doing in synchronous with the big boys…in this environment of randomness it takes a fluid-dynamic approach and I agree on the big part of psychological makeup.
Thanks for your insight!
Thanks Tatyan Scherbakova..
You’re most welcome 🙂
Just recently, I realized that it’s not about my technical and fundamental biases, rather it’s about what the market is doing in synchronous with the big boys…in this environment of randomness it takes a fluid-dynamic approach and I agree on the big part of psychological makeup.
Thank you for your insight!
Superb blog 😊. I’m the beginer of trading, now I know about movement of price
Thanks for your support all the way through! Have an awesome day!
Thank you for your feedback😊. I need to practice more and I hope I can do it better in the future…
Thanks for your great attitude. Best trades further on!
You are awesome girl, always! thanks for your writting
Thanks for your feedback
”when i read this article really i thought that this article is talking to me” thanks alot.
You’re so welcome 🙂