The Psychology of Trading

Dealing With Emotions

Trading can be very emotional and this factor is very often over looked and under estimated especially by new traders. If you are new to trading and using a demo account, try to trade and manage that demo account like it was your real account with your own money at stake. When opening a MT4 demo account, ensure that you chose an account size similar to that of your likely live account starting size. Too often new traders abuse a demo account or place massive position sizes only to find out that when they go to a live account they are unable to trade the same way.

 

Knowing Yourself

Each trader has a different style and personality. Some traders prefer shorter time frame charts such as 5 and 15 minute charts while others are more suited to the daily charts. It is important to find out what style of trader you are and then stick to that style. Trading with a low risk per trade and a good reward: risk on each trade will ensure your emotions do not dictate your trading.

Place your stop loss and your profit target for a reason and trust that reason. Too often, traders will cut short a winning position or they will move their stop loss even further away in the hope that a losing trade will turn back into their favour. Unfortunately losing trades are a part of trading but good money management will ensure that your emotions don't run away with your trading common sense.

Finally if you learn a successful trading system ensure that you stick with it and give it time to work. Many new traders, after taking a few loses will then be on the lookout for the next greatest trading system on sale or they will start changing the rules of their current strategy to suit the current market conditions. These are both very dangerous tactics that can damage your overall long term success as a trader.