The Winning Trading Psychology - sure way for consistent profits

nice work

Hi ! I am here only! just thought that not many are interested in " Psychology Part ". With Edge in you trading method , sound MM and Right Trader Psychology, nothing stands in our way to financial freedom!

I am pleased if you add valuable materials to this thread! we all are eager to read it!. Psychology is very important and another dimension of Real trading and that is why very few percent make it to the top 5-10% of Profitable traders. I know many traders with excellent educational and corporate background not trading real but just giving advice or tips. Afterall it is somewhat easy to give tips, Teach ( what happened in past and all related services. ) No Coach or trading system on earth is going to sculpt our psychology unless we trade decent amount in Live trading.

I am really happy that you have taken the lead! Hope many traders will benefit from this!

With Best Regards
Winston

There are many stages to your Forex journey but it can be simplified into 4 basic parts and it touches upon the psychology at every stage!

The first stage on your trading journey

Naturally, when you first hear about trading forex, it’s pretty exciting...

I mean, it can be a real eye opener to realise you could make some extra money outside of your day job.

And having read reports of successful traders and how they seem to make money for nothing, you rush off to open a spread betting account...

You’re ready.

You read the articles on some financial news web site and you have a hunch that the EURO will go higher.

So, you place your first trade.

You don’t stop to consider that you’ve had no training in forex, that you’ve got no real system to follow...

You were just so excited that you couldn’t wait.

But then something even more dangerous happens.

Your first few trades make you money.

You’re now walking on air.

You go to the office smiling and nobody knows what’s the matter with you.

In your mind you’ve made it. You’ve discovered the secret. You’ll never have money worries again.

In fact, you’re so excited about this that you’re even thinking about when you can hand your notice in to your boss.

You spend your lunch hour plotting out your future living on some island in paradise.

OK, maybe that’s going a bit to far...

But what I’m describing to you is what I call the ‘euphoria stage’ in your forex journey.

Don’t worry, everyone goes though this stage.

It’s a bit like being in love for the very first time...

You’re in a dream world, everything looks just fantastic.

You just can’t stop thinking about it.

You keep telling all your friends and they think you’ve finally lost it.

And while this stage feels fantastic, it could actually become very dangerous.

You see you could make some very rash decisions.

In a blossoming relationship, you might commit too much too soon...

But in trading you could easily find yourself committing too much money too soon.

Blinded by your early success you start raising your stakes and multiplying your risk.

Do so and you could be in for a very nasty shock.

Thankfully, trading has a way of dealing with us...

How to overcome the second stage of your trading journey

I call the second stage ‘crash, slash and burn’.

After your thrilling start, you decide to up your stakes...

Why wouldn’t you? If this forex thing is like printing money, why not print more and print faster?

But this is where you could quickly come unstuck.

With no training, no trading system and trading purely based on your gut feelings, it’s likely to end in tears.

You see, having had some success you get the temptation to up your stakes.

But what happens if you now hit a loser?

This time the stakes are higher so you lose a bigger percentage of your account.

So, you try again.

Your face is getting red and you feel like you’re going to cry, but you still place the trade.

And sure enough, within minutes the price spikes and it chops out your stop loss.

Or worse, you don’t have a stop loss and you let it run, hoping the market will turn around.

But it doesn’t. It continues to move against you until you’ve lost half your account.

You finally cut it and want to smash your computer.

Some people get a grip on themselves at this point and say that’s it and move to the third stage.

But others start to suffer from ‘Nick Leeson Syndrome’.

They hide their losses and plot how they could win it all back. They think nobody will ever know.

But let’s think about it for a moment...

If you’ve lost half your account, to win it back again means you now have to double your trading account.

Just to get you back to where you started.

A sobering thought.

But some people do double up hoping to win it all back on one last trade.

And yes, you guessed it, that trade loses too and now they’re out of the game, with nothing left in their account.

Of course, many actually quit at this stage and never trade again.

That’s why I call this stage ‘crash, slash and burn’.

Because it’s very destructive and everything is destroyed, including your account and your confidence.

But the good thing about this stage is that for many it actually clears the way for them to move to the next stage on their journey.

Sure, they the lesson is painful but going through it can make you even more determined than ever to succeed.

And if you’re able to, then the next stage is where your forex journey really gathers speed.

But now you know about this dangerous second stage you’ll be able to stop yourself do ‘crash, slash and burn’.

The third stage: How to ‘grow and mature’ as a trader

I call the third stage the ‘growing and maturing stage’.

This is when you start to become a serious student of forex trading and really learn how to trade.

Because by this stage... you respect the markets.

You see, in the first two stages you’ve had a taste of the highs and lows. You’ve experienced both the huge benefits and the real dangers that you could face as a forex trader.

And having tasted the downs as well as the ups, if you’re still determined to make it as an independent trader at this point...

You’re well ahead of the crowd.

Many quit before this and rarely consider trading again should they experience the second ‘crash and burn’ stage.

But as far as I’m concerned, that’s a real shame...

Fact is, if you quit at this stage, you’ve only made it half way on the journey.

To fully understand and appreciate the potential of forex, I believe you need to complete all four stages.

So, how do you work you grow and mature as a trader?

Well, I think it’s at this stage that you really need to look outside of yourself for trading experience.

So far, you’ve relied on, well, not much. You were in both the first and second stage, you were really just ‘winging it’, hoping for the best...

But it’s by accepting that you need some guidance that you can really start to guide yourself.

By testing out and trying different trading systems, you’ll discover which kind of trading best suits you.

It might be that you prefer trading a system set to a specific time each morning or it might be that you prefer more reactionary trading throughout the day.

The other big advantage of following the guidance of a more experienced forex trader is that you can become more familiar with risk management.


Any forex trader worth their salt will have a risk management element built in to the system or service and it’s by applying risk management to your own trading that you start to understand its obvious importance.

So, whatever stage you might be at...

Maybe you’re in the ‘euphoria stage’ and no matter what I tell you, you think you’ve got it all sorted...

Or if you’ve got through that and you’ve hit some bad luck and you’ve crashed and burned...

Don’t give up: keep investing in your forex education, follow the advice of the experts and work out what kind of forex trading best suits you.

It might be that you need to try some different systems or maybe attend a seminar... it might be that you need to put yourself out of your comfort zone a little...

But if you keep moving forward, if you keep gathering your own forex experiences, then you’re sure to start growing and maturing as a trader.

Final stage: Understanding you’re in it for the long haul

So, the final stage I call the ‘long term reward stage’.

When you find yourself at this stage you’ll be trading in a way that consistently makes you money...

You’re regularly picking up more profit points than you lose.

And not only are you making money, you’re trading in a way that suits you and your lifestyle.

You’ll know when you’ve reached this stage as you’ll be more relaxed when trading...

You’ll know exactly what you are looking for...

And why you see it, you’ll purposely place your trade without any stress or hassle.

Gone will be the days of panic trading and running around like a headless chicken.

For me, this stage is reminds me of being an experienced fisherman.

When you become more experienced as a fisherman, you only go out when you expect a lot of fish.

You deliberately set up your tackle in the best place, add the bait and then cast your line.

You sit back, relax, enjoy the view... just being sure to keep half an eye on the float.

In fact, some actually have a machine to do this that sets of an alarm when they’ve got a bite.

However you do it, you sit there on the bank at peace – and that’s what’s important.

The joy of becoming a contented trader

When you’re content in your trading, when you enjoy the trading itself, then you’ve won the battle.

Just like the fisherman who doesn’t catch anything that day, you know that there’ll be more fish along soon and when it comes down to it... you still enjoyed your day.

In trading, by this point you’ve learnt about risk management, so you know you’ll not be wiped out.

You’re confident to place the right trade and you’re confident you’ll place it at the right time.

And you’re patient to wait for each trade to play out, managing it as it unfolds.

There’s no guesswork, no panic.

You follow the approach you’ve practiced and practiced... the approach you discovered was best suited to you... the approach that now generates you a regular second income.

So, that’s where you want to be...

------------

This is not my writing and I got this from someone else.

There are many sub-stages in each stage, especially in stage 3. You think you have cracked it, had the light bulb moment, only for the market to come back and teach you another lesson! I am still at stage 3 and have been for about 5 months now. This stage will take the longest, if you get past the first 2 stages and a lot of people do not. I know a friend of a friend who never got past stage 2 and he does not trade anymore because of the fear of losing. Some people can stay on stage 3 for 10 years and never seem to get to stage 4.

So, there you have it! Identify which stage you are on and see if you can get to the next stage.

signing up, will read later

I'm very glad you brought out this invisible factor in trading. Some people give lip service to this thing but nobody understands it fully.

I think when we pursue trading methods, go to seminars or adopt a guru we are trying to get around this silent problem of our own growth vis a vis trading and especially winning. (Amazingly, winning is what's most difficult to accept. Nobody understands this and I'm just beginning to understand it myself, so I won't pretend that I have it all figured out until I do and then I'll tell you. But I have this intuition that it is about winning.)

Another contribution I would like to make: our intelligence, our ability to read the market is not always the same. Mine, at least, seems to contract and get stiff when I begin to feel stress, that is when I'm prey to all the things Winston mentioned: expectation, fear/greed. Once I'm in a trade I'm no longer neutral and I WANT the market to do what I think it will do. Why can't I say, if I'm wrong I'll just reverse? Why can't I listen to the market and "know" what it's doing instead of "wanting" it to do what I want? Because I'm contracted and stiff and I no longer have the kind of intuition I normally have when I just look at the market from a non-invested position.

Once I no longer have my intuition and my natural read of the market I start looking for indicators or mechanical rules to guide me and to restore me to serenity, but it's already too late, because these systems can never match my own ability to read what's happening or to admit that I don't know, right now what's happening. So I start relying on an inferior instrument (a Neural Network has about 30 neurons! We have billions!) because my own has been disabled by emotion.

Right now I'm working exclusively on my own "state" as the principal indicator of how I'll do. I trade for quality rather than results and I feel better. I like your word PEACE, Winston. In that state I know what I'm looking at without need for too many bells and whistles on the chart page. And besides, I enjoy it!...

May we all have peaceful trading!
GB

nice to have you here Sir

The trading Psychology will never win in forex .
expecially during insane time !!!!

If you want to be really good ,
No need such complicated "Winning trading Psychology !

There's a simply way:
Just go to a Psychiatric hospital, if you understand the mind of insane,
You sure got successful !!!!

Or just simply go to a kidgarden, if you can follow the nauty kids,
You could be sucessful too !!!

understanding insane mind or naughty kids is completely different from Real trading with your Money or Client's Money. For eg. Start with USD 100K and tell me what happens to you when your $1000 or may be $2000 stop is hit twice or thrice with Method having Edge and what happens when you risked $2000 and you are + $500 ! if you trade real, you will know what I mean!

Method with Edge is one thing and Human intervention is another thing.

The thread Winning Trading Psychology obviously takes in account that one should have method with Edge and positive expectancy.

hope this helps you!

Winston

Your statements do not help fledgling traders. No one has access to a psychiatric hospitals nor is one allowed into Kindergardens, unless you have young children and you drop them off before work.

If you are going to add to the thread, do so in a manner so that people can follow your thoughts in a practical way. If not, don't bother posting.

Psychology alone will not make you a successful trader, but you still need to be strong in mind to focus on trading disclipine. There is nothing complicated about that!

Trading is not easy but it is simple!

Nice one Winston

wow 20k is a lot of money to lose !! at least for me.

you should have opened a mini account say $500 and traded pennies or dimes until you were comfortable with your methodology and were making consistent profits (on average)

at first, most are not interested about the 'Psych.' part.
or
most are not interested at all.

of course, your only concern should be to mingle with those that are 'into it' like u.

nice thread Winston!

subscribing

Long term trader here.... with long term psych too LOL
Peace
Jess

Thank you.

I agree maybe I'll consider it

When you are still learning and you still haven't got a consistent method that makes consistent profits detailed in your trading plan, why risk large amounts of your hard earned cash?

When you learn to swim, does one go straight into the deep end, without any floatation devices?

Why should Forex trading be any different?

While I understand what you're saying, there's a fundamental difference between learning to trade and learning to drive a car. When we learn to drive a car we agree to go along with the rules of the road (drive on the correct side of the road, indicate when turning, follow road signs, etc.). But trading has no pre-agreed rules. That's both the joy and challenge of trading!

In which case, congratulations, you've cracked the psychology of trading! You're one of the fortunate traders who just manage to get on with it without any psychological baggage.

My personal take on trading is that individually we tend to over-complicate it. The mass of indicators on many people's charts would to me support this. I mean to cast no insult to them (in fact I'm praising them) but I have a theory that former foot soldiers, road sweepers, junior admin clerks etc. would probably be better at trading than high flying professionals. Why? Simply because they're more likely to follow rules without questioning, analyzing or 2nd-guessing them as much.

This is an excellent thread, particularly from those who have described "the journey". I'm firmly convinced that there are many, many trading strategies that work - in theory. The trading world is littered with strategies that work in back-testing, demo accounts and paper trading. But once there's real money on the table other factors kick in:
1. Pride - "I don't want to be wrong so I'm going to move my stop", etc.
2. Fear
3. Greed (both of which have been covered by other posts already).

I'm a keen reader of psychology books, articles, etc - hence reading this thread! We all respond to different ways of saying something, turns of phrase, analogies, etc. and I doubt I'll ever stop reading or re-reading about trading psychology. The best I've read so far are:

1. Mark Douglas "Trading In The Zone". Essential reading, and Chapter 1 was such a chilling reflection of the way I started trading it shocked me.

2. Alexander Elder "Come In To My Trading Room". Specifically the chapter on psychology in which he described good trading as sitting on a 3 legged stool - the legs are the individual's mindset (psychology), method (their "edge") and money management. If you don't have all 3 sorted you'll fall off your stool.

3. John Carter "Mastering The Trade". The short section on understanding the mindset of the professionals, so as an "amateur" you won't fall in to the traps they set (e.g., entering a trade when a lot of the move has already happened and the pros are now exiting).

4. Jack Schwager "Market Wizards". Much of the book is outdated now but there's a good interview with Dr Van K. Tharp.

And now I've got oneuniverse to thank and several other resources to follow up from this thread!

Enjoying reading this excellent thread. I'd also recommend Brett Steenbarger's books. In particular I liked Enhancing Trader Performance. The good thing about this book is he draws a line between trading pscyhology and trading skill - you need both, as Winston and others have pointed out.

Just to share my own journey. When I started training in forex (after losing a lot of money as a rookie), I went on a course called 'price action' - the guy was a real salesman, and had you thinking you could earn millions if you finished the course...and in the process he fed our greed, withheld information on his own trading and his other 'successful' clients, and then kept criticising us for our psychology! Needless to say we didn't end up with a clear picture of what 'price action' really was...it took a year of our own efforts to work that one out!

Since then a few of us from that course joined another course (after struggling trying to make it on our own for a year), and that also promised the earth. The difference was that it was a very good method, but still none of us got it to make us consistent profits...and finally, after months of trying to make it work, I found a psychological technique that can release me from the emotions that were getting in the way...I mean getting in the way, not just of me trading successfully, but getting in the way of me learning the skill of trading.

So now I have worked out how to identify and zap my psychological barriers, I am on the journey of learning the skill of trading...like an athlete learning to perfect his/her sport. Any good method still requires a trader with skill to execute the method well. Just like any good piece of music requires a skilled musician to bring out its beauty. And it has been said by many, trading is a skill that takes years to learn (even without the psychology issues), it is not a 'get rich quick' scheme.

So this is why I mentioned Brett Steenbarger, because he does address this issue of performance, and of self-coaching - and he addresses the line between psychology and performance.

But now on psychology:

For more than 15 years I have practised and taught re-evaluation counselling, but for trading I was struggling to apply it (that method is only about digging up your past and 'discharging' the effects of it). But while trading I learnt a more modern technique for removing unwanted emotions, it's been mentioned near the beginning of this thread, called tapping. I used it everywhere...I tried in on friends, one was an incessant gambler, another was going insane with violent outbursts following a road accident, another couldn't stand the heat of the sun, another was always going to work late...I practised it on all of them and it worked on everyone.

With my trading it worked immediately in eliminating my impatience (I was so impatient I couldn't even wait for a 5 minute candle to close before jumping in on a buy or sell!) It worked on a fellow trader who always got overstressed when price would move against him a few pips after entry. So I'd like to say folks, it isn't complicated, you don't have to read lots of books...it just takes good technique and focus. I will write more in detail about technique if anyone is interested.

Removing psychological barriers is one part, learning trading as a skill is another. One more element I'd like to add is, thanks to Mr Steenbarger, analysing your live trades to see which market you perform best in. This is how you can see where your personality/psychology can work in your favour - after analysing my own trades over the course of several months I found I perform best in downtrends on the GBPUSD, and worst on the GBPJPY in sideways markets. What does that mean? It means I limit the currency pairs I trade in (I now only trade the GU and EU), and when I get a downtrend I will increase my risk, when I am in a sideways market I'll reduce my risk right down.

Hello Lovinit,

your write up is really excellent! and I am keen to know the tapping technique this will benefit many others here in trading and all aspects of life!

Best Regards
Winston