Trading psychology

Trading psychology

The only thing you have to understand is that there are no perfect systems. Consider the casino example. The Magic Ball does not hit 100% on red. You will have successful and unsuccessful trades. Somewhere you will get a small profit, somewhere small losses, and some deal will bring you a large profit. But when this moment comes and which of the positions will be the deal of the century for you, only the Lord God knows.

A game of probabilities.

Imagine the situation that you are a casino player. The psychology here is simple roulette: red black. At first glance, the chances of a red or black hitting are 50/50. But there is also zero, which shifts the chances of winning in favor of the casino.

Let’s remove the zero and imagine that you have a magic ball, which will stop at red in 51 cases out of 100. Your chances of winning increase dramatically. And knowing this, you can easily beat any casino.

So it is on the market. What is Trading? Trading is a game of probabilities. You put money on your calculations. The fact that most likely event “A” will occur with a greater probability than event “B”. Any trading system you use gives you an edge. And it doesn’t matter which system you use and what it is based on. At the intersection of moving averages, at Fibonacci levels, or at channel breakouts. It is important that this system biases the odds in your favor.

Some trading systems are better than others. Ideal systems the holy grails that will make money at your will and at the same time never make mistakes does not exist in principle.

So don’t waste your time looking for such a magically successful system. Take what you like and what is right for you. The system that you understand and trade according to the signals of which you are comfortable and then a matter of technology.

Good trading plan.

After you have chosen a system, tested it, made sure that it works, all that is required of you is to draw up a trading plan and follow it blindly. You must clearly know what signals you are waiting for, where you will enter the market, where you will exit.

Where will you take profit, and where will you lose, and why. Under what conditions will you move your position to breakeven. Here are the key points you should know as our father before opening a deal. And all this must be written down on paper and lie before your eyes. Because, I know from myself, if on the day of drawing up the plan the market did not give entry points, then in a day or two or a week you will no longer be able to remember your reasoning and calculations.

One more point. The simpler the system, the easier it is to create a trading plan. If you have a lot of variables (indicators), then sometimes a situation arises when they start giving conflicting signals. Don’t overcomplicate. The simpler the better.

Money management is the key to survival.

Money management is the key to survival.

We talked in detail about money management and money management in one of the articles. To better understand what I want to convey to you, imagine that you have a pocket full of holes and a couple of kopecks fell through it. “Well, figs with them!” you say and move on.

Now imagine that through a hole in your pocket you have lost a plump wallet, into which all your savings were stuffed the day before. Your reaction will be: “Help, everything is gone, stop the thief!” Do you get the idea?

If in the first case you do not care, because the loss is not significant, and you know that tomorrow instead of these cents you will receive a couple of rubles. Then in the second case, God forbid, that the loss of all money does not affect your mental health.

Believe me, during my work in Forex I have seen such guys-traders who, due to excessive arrogance and a thirst for quick profit, poured the entire deposit into the market. And after losing huge sums of money, they needed medication and the help of a psychologist in order to patch up their nerves and return to normal life. Avoid stress by risking only a fraction of your deposit.