Psychology of trading.
Stress in trading
How can stress manifest in trading? Losses. Losses occur due to lack of knowledge or experience. They will always be present, as it is an integral part of the job. However, their quantity can be reduced. Paradoxically, one should not fight stress: it should be endured and one should come out of the situation with dignity. Moreover, stress can become a catalyst for more productive activity.
To begin with, define the source of stress. If it is related to family affairs, then allocate less time to trading and more to family matters. If you are overwhelmed by stops, then it is worth taking a break from practice and devoting more time to backtesting and transaction analysis. If stress is caused by lack of knowledge, it is better to review the material that has been covered. If you are not able to accomplish everything, write down all your actions during the day for a week, down to the phone call. Then write down what you can eliminate to free up those necessary minutes. You need to work on yourself constantly by analyzing mistakes and drawing conclusions. This applies not only to trading but to all aspects of your life.
You may think, "What an unfair exchange: the price took my stop-loss order again and went in the right direction, why does everyone in the chat have profits, and I'm the only one sitting here with stops? What's wrong with me? Am I a loser?" No, in trading, although luck plays a role, it is definitely not the most important factor. It is important to understand that trading is about working with probabilities. No one knows how your area of interest will play out, no one knows where the chart will go tomorrow, no one even has any idea how much assets will cost in a year. There are only probabilities of how certain instruments will work. Therefore, you need to change your attitude towards failures. Collect data on the operation of setups, know the percentage of tools that you use that work positively and negatively. If the trade did not happen, it is not scary if you already have statistical data and have conducted backtesting. How many out of 10 trades does this trading instrument work in the positive? How many in the negative? There must be clear answers to these questions before starting to trade. If you analyze your failures and understand that you are solely responsible, then there is no need to worry. Any business is supported by the responsibility of the entrepreneur. If you received a stop order just because Elon Musk tweeted something, that's one thing. If you received a stop order because you incorrectly determined the trend, that's a completely different matter. Like stress, you should not fight failures, or you will lose.
Obstacles on the path to stability.
Addiction.
If you are an extremely addictive person, enjoy gambling and get an adrenaline rush from the process itself, then you should think about how you will cope with addiction during trading. Gambling and professional trading are inherently antonymous and lead to different results.
Attitude towards money.
Do you have a very reverent attitude towards money? Maybe you need to work on your attitude towards money? Perhaps it's not worth overestimating their importance? After all, this can adversely affect your emotional health in the future. Money in trading is a working tool, but at the initial stages of a trader's development, money will still be perceived as a means of payment. For example, when closing a deal, thoughts may come to mind that in just 10 minutes, your trading account has increased by an amount equal to someone's monthly salary. Or that the stop you just caught could have been used to purchase something significant for you. The transition from standard thinking to a professional one takes time. It's about when the funds in the trading account have only a percentage value. And both profit and loss. Money will be a catalyst for all of your skeletons that will fall out of the closet as soon as you open a position on the stock exchange. It's inevitable."
Practical methods for problem-solving.
Time. Don't spend 24/7 staring at charts and watching every candlestick. Besides overtrading and fatigue, you won't get anything (you definitely won't earn more money). Therefore, choose a working schedule for yourself. Either work all day and relax in the evening, or occasionally monitor the situation during the day, after analyzing charts in the morning and placing limit orders, while you focus on your other activities. Yes, it will be difficult to choose a time for yourself right away. It will come to you when you decide on the type of trading, whether it's scalping, swing, intraday, etc.
Pay attention to the chart. Set your preferred color scheme and tools in Trading View and on the exchange itself.
Keep a notebook. In the beginning, write down everything. All observations, all trades, all emotions, all shortcomings. Write down absolutely everything, every day.
Write yourself a checklist, add everything that hinders your work, and hang it in front of the monitor. Every morning, before looking at the chart, check if the conditions are met. For example: great mood, no headaches or other pains, well-rested, focused. All urgent matters are taken care of, so that nothing distracts you, etc. And most importantly - be disciplined.
Calculate profit and loss ONLY in percentages. Your deposit is 100% and only that matters, regardless of how much it is in $. It is only important how much it increases monthly in %. If you get used to this simple rule initially, the improvement in your life and finances will not take long to come. Compound interest will do its job.
Create and refine your trading system. The trading system is the most important element of trading that helps you cope with stress, see the big picture, and know your goals. But creating a trading strategy is one thing, and FOLLOWING THE RULES that you have set for yourself is another thing. The trading system provides the opportunity to neutralize all types of worries. Worries arise when a trader violates his own rules.
Backtests. The most important element of trading activity. Know for sure when to open a trade, know the percentage of instrument performance, and know the exact stages of market analysis. Print out data about your personal business. Keep track of it. Stop playing on the exchange - trade professionally.
Psychological correction.
Rest is as important as anything else. You decide how to spend it. I would like to tell you when you should take a break for a while:
Several stops in a row. Determine your critical point of losses (percentage of drawdown of the trading account) for the day, week, or month, again, this depends on your trading style. For example, for me, it's a critical point of 1% within a day, after which I turn off the computer and do not approach the charts or the terminal. Sometimes I can afford to do backtests, but even that doesn't help because my head is not cool or rational.
Do not try to recoup your losses! Know that you can only worsen the situation by trying to get back the money that has already been spent. The money is already gone, and losses are part of any business. Reached the critical point? Turn off the computer, spend time with your family, go to the gym, or engage in your hobby. Understand that the market won't go anywhere, it will be here tomorrow, the day after tomorrow, and even in 5 years, the market will always be there as long as humanity exists.
Profitable trades. It's also always worth taking a break, either after a trade with a big profit or after a series of successful trades. Why? Because you are filled with euphoria, you think that this is it, the bright streak in trading, and this distracts your attention, you also become less responsible, you can increase the risk on a trade or ignore the stop loss. I think you got the logic. Everything is going well? Well, that's great. Take the earned funds, spend them on yourself, give yourself or your loved ones a gift. You simply need to do this; you must feel that you are earning. As long as the money is on the exchange, it's 100%, but as soon as you withdraw the funds from the exchange, it's already $. You can't earn all the money in the world. It doesn't make any sense.
Freedom. Trading can give you the most important thing - freedom. Freedom in finances, freedom from depending on a workplace, freedom to manage your own time. BUT: only when you can accept this freedom. If you sit at the computer for days, trying to grow your deposit with thoughts like "when I have $100,000, then I will rest," denying yourself pleasures: "It's better to buy a coin with this money, and it will grow," etc. - in this case, you yourself deprive yourself of freedom and become a prisoner of this squirrel wheel. Don't look for an entry into a trade inside every area of interest on a 5M timeframe. In the end, you'll just stop getting anything from trading, and it will become just a source of stress and loss.
How can stress manifest in trading? Losses. Losses occur due to lack of knowledge or experience. They will always be present, as it is an integral part of the job. However, their quantity can be reduced. Paradoxically, one should not fight stress: it should be endured and one should come out of the situation with dignity. Moreover, stress can become a catalyst for more productive activity.
To begin with, define the source of stress. If it is related to family affairs, then allocate less time to trading and more to family matters. If you are overwhelmed by stops, then it is worth taking a break from practice and devoting more time to backtesting and transaction analysis. If stress is caused by lack of knowledge, it is better to review the material that has been covered. If you are not able to accomplish everything, write down all your actions during the day for a week, down to the phone call. Then write down what you can eliminate to free up those necessary minutes. You need to work on yourself constantly by analyzing mistakes and drawing conclusions. This applies not only to trading but to all aspects of your life.
You may think, "What an unfair exchange: the price took my stop-loss order again and went in the right direction, why does everyone in the chat have profits, and I'm the only one sitting here with stops? What's wrong with me? Am I a loser?" No, in trading, although luck plays a role, it is definitely not the most important factor. It is important to understand that trading is about working with probabilities. No one knows how your area of interest will play out, no one knows where the chart will go tomorrow, no one even has any idea how much assets will cost in a year. There are only probabilities of how certain instruments will work. Therefore, you need to change your attitude towards failures. Collect data on the operation of setups, know the percentage of tools that you use that work positively and negatively. If the trade did not happen, it is not scary if you already have statistical data and have conducted backtesting. How many out of 10 trades does this trading instrument work in the positive? How many in the negative? There must be clear answers to these questions before starting to trade. If you analyze your failures and understand that you are solely responsible, then there is no need to worry. Any business is supported by the responsibility of the entrepreneur. If you received a stop order just because Elon Musk tweeted something, that's one thing. If you received a stop order because you incorrectly determined the trend, that's a completely different matter. Like stress, you should not fight failures, or you will lose.
Obstacles on the path to stability.
Addiction.
If you are an extremely addictive person, enjoy gambling and get an adrenaline rush from the process itself, then you should think about how you will cope with addiction during trading. Gambling and professional trading are inherently antonymous and lead to different results.
Attitude towards money.
Do you have a very reverent attitude towards money? Maybe you need to work on your attitude towards money? Perhaps it's not worth overestimating their importance? After all, this can adversely affect your emotional health in the future. Money in trading is a working tool, but at the initial stages of a trader's development, money will still be perceived as a means of payment. For example, when closing a deal, thoughts may come to mind that in just 10 minutes, your trading account has increased by an amount equal to someone's monthly salary. Or that the stop you just caught could have been used to purchase something significant for you. The transition from standard thinking to a professional one takes time. It's about when the funds in the trading account have only a percentage value. And both profit and loss. Money will be a catalyst for all of your skeletons that will fall out of the closet as soon as you open a position on the stock exchange. It's inevitable."
Practical methods for problem-solving.
Time. Don't spend 24/7 staring at charts and watching every candlestick. Besides overtrading and fatigue, you won't get anything (you definitely won't earn more money). Therefore, choose a working schedule for yourself. Either work all day and relax in the evening, or occasionally monitor the situation during the day, after analyzing charts in the morning and placing limit orders, while you focus on your other activities. Yes, it will be difficult to choose a time for yourself right away. It will come to you when you decide on the type of trading, whether it's scalping, swing, intraday, etc.
Pay attention to the chart. Set your preferred color scheme and tools in Trading View and on the exchange itself.
Keep a notebook. In the beginning, write down everything. All observations, all trades, all emotions, all shortcomings. Write down absolutely everything, every day.
Write yourself a checklist, add everything that hinders your work, and hang it in front of the monitor. Every morning, before looking at the chart, check if the conditions are met. For example: great mood, no headaches or other pains, well-rested, focused. All urgent matters are taken care of, so that nothing distracts you, etc. And most importantly - be disciplined.
Calculate profit and loss ONLY in percentages. Your deposit is 100% and only that matters, regardless of how much it is in $. It is only important how much it increases monthly in %. If you get used to this simple rule initially, the improvement in your life and finances will not take long to come. Compound interest will do its job.
Create and refine your trading system. The trading system is the most important element of trading that helps you cope with stress, see the big picture, and know your goals. But creating a trading strategy is one thing, and FOLLOWING THE RULES that you have set for yourself is another thing. The trading system provides the opportunity to neutralize all types of worries. Worries arise when a trader violates his own rules.
Backtests. The most important element of trading activity. Know for sure when to open a trade, know the percentage of instrument performance, and know the exact stages of market analysis. Print out data about your personal business. Keep track of it. Stop playing on the exchange - trade professionally.
Psychological correction.
Rest is as important as anything else. You decide how to spend it. I would like to tell you when you should take a break for a while:
Several stops in a row. Determine your critical point of losses (percentage of drawdown of the trading account) for the day, week, or month, again, this depends on your trading style. For example, for me, it's a critical point of 1% within a day, after which I turn off the computer and do not approach the charts or the terminal. Sometimes I can afford to do backtests, but even that doesn't help because my head is not cool or rational.
Do not try to recoup your losses! Know that you can only worsen the situation by trying to get back the money that has already been spent. The money is already gone, and losses are part of any business. Reached the critical point? Turn off the computer, spend time with your family, go to the gym, or engage in your hobby. Understand that the market won't go anywhere, it will be here tomorrow, the day after tomorrow, and even in 5 years, the market will always be there as long as humanity exists.
Profitable trades. It's also always worth taking a break, either after a trade with a big profit or after a series of successful trades. Why? Because you are filled with euphoria, you think that this is it, the bright streak in trading, and this distracts your attention, you also become less responsible, you can increase the risk on a trade or ignore the stop loss. I think you got the logic. Everything is going well? Well, that's great. Take the earned funds, spend them on yourself, give yourself or your loved ones a gift. You simply need to do this; you must feel that you are earning. As long as the money is on the exchange, it's 100%, but as soon as you withdraw the funds from the exchange, it's already $. You can't earn all the money in the world. It doesn't make any sense.
Freedom. Trading can give you the most important thing - freedom. Freedom in finances, freedom from depending on a workplace, freedom to manage your own time. BUT: only when you can accept this freedom. If you sit at the computer for days, trying to grow your deposit with thoughts like "when I have $100,000, then I will rest," denying yourself pleasures: "It's better to buy a coin with this money, and it will grow," etc. - in this case, you yourself deprive yourself of freedom and become a prisoner of this squirrel wheel. Don't look for an entry into a trade inside every area of interest on a 5M timeframe. In the end, you'll just stop getting anything from trading, and it will become just a source of stress and loss.
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