Trading Psychology - How to Control Emotions on Forex

In this thread I will post articles and videos about trading psychology.

Here you can read my free report about trading psychology "7 Secret Ways to Control your Discipline and Increase Trading and Investment Profits"


You can read more post on my blog about trading and investment psychology - the most popular blog about trading psychology (by Alexa Ranking).

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Youtube videos:

1. New way of dealing with losses http://www.forexfactory.com/showthre...93#post7433793
2. New way of dealing with losses. Part 2 http://www.forexfactory.com/showthre...88#post7447388
3. New way of dealing with losses. Part 3 http://www.forexfactory.com/showthre...61#post7456361
4. New way of dealing with losses. Part 4 http://www.forexfactory.com/showthre...85#post7464585
5. 3 ways to become a frutrated trader http://www.forexfactory.com/showthre...91#post7473091
6. How to become a stress free trader http://www.forexfactory.com/showthre...54#post7485554
7. Why do intelligent investors and traders lose http://www.forexfactory.com/showthre...02#post7501902
8. How to stop overtrading http://www.forexfactory.com/showthre...03#post7511303
9. How to trade for 5 years without making any improvements http://www.forexfactory.com/showthre...23#post7524723
10. Secret formula to become a perfect trader http://www.forexfactory.com/showthre...65#post7527365
11. Is a long and hard work enough to make money on financial markets? http://www.forexfactory.com/showthre...19#post7567919
12. Can praying increase your profits? http://www.forexfactory.com/showthre...03#post7598603
13. How to don’t trade or invest and make money financial markets? http://www.forexfactory.com/showthre...24#post7721124
14. How to trade like Leonardo DiCaprio? http://www.forexfactory.com/showthre...03#post7792503
15. Kaizen of trading http://www.forexfactory.com/showthre...86#post8221186
16. How to trade and invest like Steve Jobs http://www.forexfactory.com/showthre...68#post8273368
17. How to achieve successful mindset http://www.forexfactory.com/showthre...28#post8331228
18. How to be happy despite taking a loss http://www.forexfactory.com/showthre...95#post8355195
19. How to improve your trading results http://www.forexfactory.com/showthre...93#post8378793
20. Proven way to improve your trading skills http://www.forexfactory.com/showthre...10#post8385310
21. Why traders publish profitable strategies http://www.forexfactory.com/showthread.php?p=8409493#post8409493
22. Proven way to trade less and increase your profits http://www.forexfactory.com/showthre...62#post8423762
23. How to increase creativity while trading (and not only) http://www.forexfactory.com/showthre...50#post8467750
24. Proven way to increase luck in trading http://www.forexfactory.com/showthre...23#post8530523
25. How to achieve impossible trading goals http://www.forexfactory.com/showthre...18#post8601018
26. Are you a confident trader? http://www.forexfactory.com/showthre...58#post8630658

How to stop overtrading and stick to your plan?

You promised yourself that today you would stick to your trading plan. No stupid trades. Only good setups. You opened your platform and watch the markets. You didn’t see anything interesting. But you weren’t satisfied. You watched the markets one more time. You noticed one setup. It was not good, at most medium. You knew that you should not have traded it. But you wanted to do it. Maybe you wanted to feel excitement. Maybe you wanted to prove something to your parents, friends or boss. Or maybe you wanted to get rich fast and quit job which you hate.

So you took that trade. Maybe you lost a little bit or maybe not. But nothing terrible happened. So you took another trade. And another. Few trades later you started trading without thinking. After some time you realized that you had lost a substantial part of your account.

Sounds familiar?

Can you fix it?

You may think that overtrading is a constant part of your nature. That you can’t control it. But it is not true. You can change any of your habit. You just need to follow some easy steps.

In the first step you observe yourself while trading. Recognize how a FIRST temptation to take stupid trades appears in your mind. Probably you want to take these trades because you want more excitement, money or maybe you want to feel powerful, admired, free or smart.

So you know how your mind convinces you to take stupid trades. Now you can make your mind to support your trading results.
When a temptation to take stupid trade appears in your mind just pinch yourself. It doesn’t have to be hard. But you must feel the pain.

Do you think it is stupid? Maybe it is. But it works. So decide if you want to overtrade and lose money or do something which may look stupid for somebody and stop losing money.

Why should you do it? Because your brain knows that a pain is something bad and you must avoid it. Otherwise you could die. So if you pinch yourself when you feel a temptation to take stupid trade then your brain will know that taking stupid trades is dangerous.

Additionally give yourself purses when you follow your plan. It doesn’t have to be something big and expensive. It can be just saying to yourself “I am good”. You will use another natural pattern of your brain which knows that following nice emotions is good for you. Your brain use it to convince you to take actions which are necessary for you and your family to survive, for example to eat or have sex. So if you give yourself purses then your brain will know that sticking to your plan is good.

At the beginning it may be hard for you to create the new habbit of sticking to your plan. But in the next days it will be easier. If you follow your new habbit and don't overtrade then it should take 21 days before it will become natural part of you.

Trading psychology - a key to your success

If you want to make money on any market then you must have 3 things.

1. knowledge
2. experience
3. ability to make your emotions support you

It is easy to gain knowledge. There are a lot of useful and free materials in the internet.


If you use them after some time you will get experience.

But the key issue is psychology. Even if you have knowledge and experience but haven’t mastered this field then you will not make money.

Why? There are a lot of reasons. For example imagine that you have a profitable system. You earned something. But in the last 10 transactions you lost money. You know that it doesn’t mean that your system has become unprofitable. You can make money on them.

But if you don’t know how to control your emotions then it will be very hard for you to use this system. You will probably look for another one. You will have to spend time on searching and learning another system.

On the other hand imagine that you know how to deal with a long series of losses. You don’t mind that you have lost on last 10 transactions. You keep to your old system and after some time you make money again.

So how do you want to spend your time? Learning new systems or making money?

Why intelligent traders lose on Forex?

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Have you ever heard about LTCM hedge fund? It was run by Myron Scholes and Robert Merton, 2 professors which got Nobel Prize in economics in 1997 for the new formula to determine the value of derivatives. One year later LTCM went bankrupt.

Accident? Rather not. Probably you know or heard about intelligent and successful layers, doctors, engineer or managers which lost a lot money on Forex.

On the other hand there are successful traders like Nial Fuller who has never went to college.

What is the reason? Why many intelligent people lose on Forex with traders without any university or college degree?

How to make the best decision?

Before I answer that question I must tell you about some scientific experiment. It was on University of Amsterdam which is among 100 best universities on the world.
Participant of this experiment were divided on three groups. People from the first group had to made their decision immediately. They had no time to consider any issue and they had the worst results.

People from the second group made long analysis before they made decision. They had better results than people from first group but still most of them were wrong! Experiment showed that if you make long analysis after some time of thinking you stop controlling yourself. You focus only on few issues and make decision based only on them. Unfortunately you don’t consider other issues which are also relevant.

People from the third group were manipulated to make their decision based on their intuition. Participant from that group considered all relevant issues. They had much better results than other groups.

How does it deal with Forex?

What is the connection between that experiment and Forex? Intelligent and successful professionals like layers developed habits which gave them success in their job. They gather data, analyze it and find the best solution.

They apply this habit on Forex. But on Forex it doesn’t work! You can spend one year on gathering data before you take one trade. But then it starts working process from the experiment. You focus on random piece of information, ignore other issues and make decision based only on that.

Probably you say something like this.

“Price just crossed the moving average so I am buying. I noticed that strong resistance line. But I am sure that price will break it.
Oh no! It has not. I lost again. How is it possible?”

The solution

So what can you do to deal with these problem? It is a longer process which will take more than one day or week. But in the first step you can you use solution from my free report about trading psychology.

In nutshell: do not blame or punish yourself because of your mistakes. It is not your fault and if you do it you will only enforce your inefficient habits.

Observe and accept your mistake. When you do it your judgment and decisions will be more rational and profitable.

How to become a stress free trader?

Some people think that a stress is a constant part of trading. In my opinion these people confuse stress with excitement.

Excitement is a supportive feeling. It motivates you and gives you fun. Without it you may not have motivation to trade.

But stress is an overwhelming feeling. It warns you that your goals are above your skills and you may have a big problem if you fail.

Do you need to be stress free?

Do you have to a be stress free trader to make money on markets? No!

My friend during his studies made a lot of money on stock market. He bought his first luxurious car. But he was so worried that markets may run against him that he was not able to sleep. Because of that he quitted trading and now he is a successful entrepreneur.

So you need to decide. Maybe you want to focus only on money and ignore stress. If you do it be aware that you may have problems with sleeping, you may waste your time on thinking about unpleasant and unproductive things, you may have problems with sex (stress decrease your potency), you may have no temptation to enjoy life, spend time with your friends or on your hobby.

Or maybe you think that money is not everything. Maybe you want to have money AND enjoy happy private life. Maybe you don’t your trading to be a struggle but an exciting challenge.

How to do it?

What should you do to become a stress free trader? It depends on the reason of your stress.

Reason 1. You risk too much.

You must accept that you may lose all your money. If you are a good trader then probability of this is low. But it always exists.

If you risk too much then there is a good reason for you to be stressed. You may lose savings which you need for something else. Or maybe you took a debt and if you blow your account then you may have a real problems.

Solution: Decrease your trading account. Risk only money that you can lose.

Reason 2. You treat trading as the only chance to quit your job or other situation that you hate.

You are worried that if you don’t make money on Forex then your life will never be as you want to be. But you don’t control the markets so you are stressed because you think that you don’t control your life.

Solution: Focus on things which you can control and which may change the level of your life. Accept your job, accept that you may have it for some time. If you really hate your job find something else which may be OK for you.

Reason 3. You don’t accept that you sometimes lose.

You very much don’t want to lose. But everybody sometimes do it. So you also sometimes lose. In effect you are stressed because you think that you don’t control your life.
Solution: Accept that you will sometimes lose. Treat your losses as something that gets you closer to your profits.

Reason 4. You gave yourself a task to make X dollars in a trading profits in this year/month/week.

On Forex and other markets you do not strictly control your profits. Even if you have a profitable strategy then you may have a losing month. You can’t be sure how much you will earn. So if you gave yourself a task to make X dollars then you have a goal which is beyond your control.

Solution: Accept that you can’t plan to make X dollars in a given time. Focus on following your profitable plan and profits will appear anyway.

Do your goals support your trading?



Any self development guru will tell you that you should plan your future. He or she will add also that your goals should be SMART which means Specific, Measurable, Achievable, Relevant and Time-bound.

Many people apply this guidelines in their work and they achieve success. After that they apply it on Forex. But they lose. Why?

When you set your job goal using SMART criterion you start a supportive process. You have a positive vision of goal which everyday motivates you to work. When you focus on that vision you automatically think what you need to do to achieve it. You see a road which may get you to that goal and you divide it on small steps. After that you focus on the first step to your desired future and you make this step. Next you focus on the second step, you make it and so on. Finally you achieve your goal.

Why it doesn’t work on Forex?

But why it doesn’t work on Forex? In normal job if you make any effort to achieve your goal then you get some positive results of your input. Additionally you can also predict the results of your work.

But on Forex it is different. You can follow your profitable plan and have a losing month. You can’t also be sure about your future gains. You may know yours or other trader’s past results but yours future results will be almost always different.

Because of that if you set a SMART trading goal (for example “I will make X dollars in this year”) then you are probably stressed or unmotivated. Stressed because you are afraid that you will not achieve your goal (because you don’t control if you achieve it or not). If you are stressed then you probably risk less than you should and make less money. You also harm your private life.

You may be also unmotivated because you see no sense on focusing on trading when your goal is beyond your control. Because of that you are not concentrated and you make poor trading decisions.

So how should you set your trading goals? Set your goals about the only thing which you control on markets – YOU. Plan that you will follow your plan, work with your mindset and money will come sooner or later.

One simple decision which may increase your profits.



You can make one simple decision which will probably increase your profits.

Spend between 5 and 10 percent of your monthly trading profits on charity.

What should you do it?

Reason 1. Because it will be easier for you to deal with a long series of losses.

When you spend money on charity you think about yourself as a generous person. You believe that you deserve good things and that after losses there will be much bigger profits.

Reason 2. Because it will be easier for you to take risky but profitable trades.

Do you think that spending money on charity is a stupid idea? Probably you believe that is hard to make money, especially on financial markets. I do not want to discuss if it is true or not because it can’t be proved. I just want to say that it is your subjective opinion which doesn’t support your trading.

Why? Because it is hard for you to take risky but profitable trades. You are worried that you will lose your money and it will be difficult to earn it back.

But I know from my experience that when you spend some money on charity then you automatically start believing that there is a lot of money on the market and it is not so hard to make profits. When you believe in that then it is easier for you to take risky but profitable trades and make money on market.

Reason 3. You will be more motivated to make us much money as you can.

Long time ago people used to live in small communities like tribes. If any person from that community would have made some unacceptable think like theft then he or she would have been expelled and would have probably died.

Now the times are different but we still prefer doing thinks which are good for society. So what can you do good for society? Make as much money on markets as you can! Why? Because you will spend more money on charity.


How spending money on charity may increase your profits? I will give you an example. You decided to spend 5% of your monthly profits on charity. Because of that you were more motivated, you took more risky but profitable trades and you followed your plan instead of your losses. In effect you trading was more efficient by 20 percent. 0,95*1,2= 1,14 which means that you made 14% more than if you would not have spent money on charity.

Are you too much determined to make money on Forex?


You must be determined to achieve your goals. Otherwise you will have no motivation to follow your plan.

But you may be determined too much. How? In two ways.

You may be absolutely confident that your predictions about markets are right and they must happen. But anybody can be wrong, even you. So what would you do if your prediction was wrong? Probably wait for market recovery and lose a lot of money.

You may also put too much pressure on yourself. If you do it trading will be a real, unpleasant struggle for you. Probably you will decide that trading is not for you and look for more pleasant way of making money.

You know that you should be determined but you should not be determined too much. So how can you figure if the level of your determination is accurate? There is not any concrete rule which would tell you that. You can only observe yourself and check if you have enough determination to follow your plan, you are not too much confident about your predictions and you do not put too much pressure on yourself.

How your losses make your profits on Forex?

If you trade then you sometimes lose. There is not anybody who can make money in any transaction. Of course there is a few per cent of people who make money on financial markets. But even them sometimes lose. So I am sure that if you are an active trader then you made some losses in last month, or maybe in last week or maybe even today
You can deal with losses in 3 ways.

1. You hate losses.

You hate losses because you lose money, because they show that your predictions were wrong. You think (probably unconsciously) that losses are failures, and only life losers have failures, so when you take a loss it means that you are a loser. Because of that you punish yourself, call in your mind an idiot or stupid. Or maybe you defend against that and manage your anger against others: you say that markets are manipulated by big banks which stole your money.

This attitude is very popular among traders, especially these which don’t make money. It doesn’t support your trading because your judgment and decisions are not stable and rational. They depend on your current performance on the markets. If you win your decisions may be correct. If you lose you tend to feel fear or anger and risk more or less than you should.

2. You accept losses.

You treat losses like taxes. You do not like them because they take you your money but you understand that you must pay them to earn anything.
This attitude is popular among more aware traders and it is more supportive than hating losses. But it is not so good! You don’t like losses so you try to avoid them: you may not take risky but profitable trades or look for more pleasant way of making money and quit trading.

3. You enjoy your losses.

You are like Michael Jordan who said “I love this game”. He loves basketball and you loves trading. You would trade even if you were rich because you enjoy it so much. You want to win but you are not so focused on financial results of your trading. Mainly you focus on enjoying trading.

It doesn’t matter for you if you lose or win You know that losses are a part of your loved game so you enjoy them. You follow your profitable trading plan so after losses there will be profits.
This attitude is shared among the best (read Jack Schwager’s interviews) and the most profitable traders. You are motivated, you trade as often as you can, you do not need to take a break after long series of losses, you do not hesitate to take risky but profitable trades. You are an imaginative and happy trader who is always calm and rational.

Most of the traders with this attitude naturally love trading. But you can also learn it.

So which attitude would you like to have?

Why should you enjoy losses?


Last time I told you about dealing with losses by enjoying them. But I know that you may some excuses to apply this solution.

Excuse 1. You think that it is not possible.

You can read Jack Schwager’s interviews with the top traders. They enjoy trading, and don’t worry about losses because they know that they will win in future. These traders weren’t born with that attitude but they developed it. So you can do the same.

Excuse 2. You think that trading is about being serious not about joy.

If you do something that you enjoy then you are more creative and motivated. If you also like winning then you are motivated to use your creativity to make money on markets.
If it doesn’t convince imagine that you manage your company and you want to hire an employee. You have 2 candidates. One has medium experience but he is passionate about his job.

Second one is more experienced but he doesn’t like his job and he do it only for money. Which one would you hire?

Probably the passionate. Why?

Excuse 3. You are worried that you will enjoy losing and lose more money than usual.

If you follow the attitude of the top traders you will not enjoy losing. The point is that you will not but focused on the results of you trading but on the process of trading which will give you a lot of fun.

In effect you will enjoy trading EVEN WHEN you lose. And you will make money because you will use your creativity (which will be stimulated by joy) to win.

One movie which may stop your profits


Many traders admire Gordon Gekko in the film “Wall Street”. I am one of them.

GG is smart, rich, he knows people, art and he seduces beautiful women.

But he also has negative characteristics. He almost ruins well prospering company which hires thousands of people, only to make another millions. He is proud that he doesn’t create anything but only speculate. He is also cynic, arrogant and cheats his friend.

You may say that you want to be like Gordon Gekko instead of that. You may say that you care only about money. But it is not probably true because most of people (including you) want to make things which are good for society.

Because of that if you think that successful traders are like Gordon Gekko then it may be hard for you to become one of them. Why? Because deeply in your heart you probably don’t want to be a person which may not be respected by society. So if you want to be like GG then you may unconsciously self-sabotage your trading.

Moreover it is only illusion that you should be like him to become a successful trader.

Illusion 1. You need to be cynical and arrogant to make money.

Being arrogant and cynical doesn’t give you any advantage on markets. In fact it would be better for you to be humble because you will not stick to your wrong decisions and cut your losses early.

Illusion 2. Successful traders don’t create anything.

If you want to become to a successful trader then you must create something new: yourself. You need to create profitable trading plan, become disciplined, start controlling your emotions and many other things. Moreover if you become wealthy you will have a lot of time to use your creativity to make something good for society.

Illusion 3. Successful traders exploit hard working people and other traders.

99,9% of traders have no power to ruin any country or even a small company. But is OK because you don’t need to do that to make money. It will be enough if you create a profitable trading plan and follow it.

You also don’t exploit other traders because they are adult people and they should be responsible for their decisions. So if you win they money you have no reason to feel sorry about that.

How to make learning trading easy?

Imagine that you want to achieve some new skill, for example playing tennis. You don’t know anything about tennis so you get some knowledge about it. Maybe you hire a coach. You practice playing tennis. At the beginning you make a lot of mistake so you almost always lose. After some time of practice you learn from your mistakes. You correct them, play better and win more games. You are happy that you made a progress so you congratulate yourself or give some other purse. You are motivated so you practice, win more games, congratulate yourself and so on.

It is a great process which automatically support your improvements. If you do something good then you win. If you do something bad then you lose. When you do correct things you see improvements which motivates you to stick to them and make another progress.

This pattern works in almost any field. Especially in trading. Right?

NO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Unfortunately in trading, investing and some few more fields this fantastic pattern doesn’t work. You can follow your profitable plan and lose. You can trade stupid setups and win. Of course in the long run you win if you trade only good setups. But you may become so frustrated that you follow your plan and lose that you will stop trading earlier.

This is the reason why it is so hard to learn trading and only few people win on markets.

How to make it easier? Adapt process which supports learning to trading. Make it supports behaviors which will give you money in the long run.

Become less focused on the financial results of your trading. Focus on your discipline. If you follow your plan then congratulate yourself. Note in your notebook any day when you stick to your plan. Because of that you will see a progress in your trading even during short periods of losses.

Why should you master trading psychology?


Do you know why on any forum about trading you can find millions of posts about systems and strategies and only few about psychology? Because 90% of traders are heterosexual men which think that working with emotions is something gay.

Maybe it is true. But I have never heard about any adult man which become gay because he worked with his emotions. But let’s get to the point.

In any field where people compete for big money the winners work with their emotions. Cristiano Ronaldo, one of the top footballers practice special, sophisticated mental training which increase the level of his concentration. Successful entrepreneurs, like Jeff Bezos (founder of Amazon) hire coaches which work with their habits and mindset.

Do you think that these successful people do it because they are gay? Because they want to impress other people? Because they don’t know how to spend their money? Because they are bored?

No! Because they know that it works. They know that in high competitive branches even small details are crucial, that their mindset defines if they are winners or losers.

Do you think that trading is different?

Of course not. You can win a lot of money but first you must defeat many other traders. But you will not do it without a correct mindset.

Why? Because your mindset decides if you follow your plan or not, if you give up after few losses or not, if you take risky but profitable trades or not and many other crucial elements of your trading.

Top traders are masters in these areas. Do you think that you can win their money with your current mindset? If you haven’t spent time on improving it then probably not.

Your mind is prepared to help you survive in society, not to win money on financial markets. It will tell you that following your trading plan is exhausting because it doesn’t like new habits. It will tell you that you should give up after few losses because it doesn’t like emotional pain. It will tell you that taking risky trades is bad because it doesn’t like risk.
How to deal with it? How can you achieve mindset which will support your trading? I will tell you soon.

Why don’t traders want to control their emotions?


Most of traders notice that their emotions don’t help them make money on financial markets. But they don’t even try to fix it. Why?

Reason 1. Because traders think that their emotions are not important.

In any field where people compete for big money the winners work with their emotions. They do it because they know that their mindset define if they are among winners or losers.

Reason 2. Because traders think that their emotional reactions are a natural part of them.

The emotions that you fell when you trade aren’t natural. You learned them.

You have some life experience. Your brain based on that experience produce emotions which help you survive and achieve your goals (it makes you feel hungry to make you eat something, it makes you to feel sleepy to make you sleep and so on).

Usually it works because your brain was created to support you. But it doesn’t work on financial markets. Your brain don’t know how to support you so it produces irrational feelings which make that you lose.

But you can relax. You can teach your brain to support your trading and it will do it with pleasure.

Reason 3. Because traders learned that they can’t control their emotions.

Imagine that you have a profitable trading plan. You start trading and you lost the first trade. What do you feel? Probably some unpleasant emotion like fear, anger or guilt. You know that you have no rational reason to feel it. If you want to win in the long run then you must sometimes lose.

Great, but you feel this stupid emotion even stronger. You can give yourself one million rational arguments to be calm but it will not change anything. You can force or punish yourself to feel something different but it will only enforce your feeling.

So what can you do? Nothing? Accept that you must feel stupid and feelings which negatively affects your trading results and private life?

Or maybe there is something that you do to fix it? Maybe you can control the emotions that you feel when you trade?

Of course you can! How? I will tell you soon.

How to master emotional control in trading?


Your brain was created to support you to achieve your goals. It does it by producing emotions which enhance you to take some actions. For example your brain creates the feeling of thirst to convince you to drink water and increase the level of your energy.

Usually it works. But it doesn’t work on financial markets. Your brain doesn’t know how to support your trading. Because of that it creates irrational emotions. For example imagine that you have a profitable trading plan but you lost the first trade. You know that it is OK because you will make more money in future. But your brain thinks that losing is a big threat for you and it doesn’t want you to trade. So it makes you to feel fear.

Teach you brain how to support your trading

But you can teach your brain to support your trading.

I told you how to deal with overtrading. You can change any of your emotional pattern in the same way.

In the first step define what you want to change. When you overtrade you probably want to stop trading poor setups.

In the second step recognize the emotional pattern which you must change to achieve your goal. When you overtrade your brain creates a vision of a purse which convinces you to trade poor setups. This is what you want to change.

In the third step accept your current emotional pattern no matter how stupid and irrational it is. Don’t blame yourself, feel guilty, punish yourself. It will only enforce you old emotional reaction.

In the fourth step define how you want to behave despite your old habit. When you overtrade you want to stick to your plan despite trading poor setups.

In the fifth step think what emotions and actions would support this new behavior. When you want to stop overtrading it would be good if you feel some nice emotion when you stick to your plan and unpleasant emotion when you have a temptation to trade a poor setup. Because of that congratulate yourself when you stick to your plan a inch yourself when you have a temptation to trade a poor setup.

In the sixth step practice this behavior until you change your old habit.

Now you can change any of your emotional pattern and teach your brain how to support your trading.

One sentence which may increase your profits


What do you say in your mind when you plan trading? “I must trade” or “I want to trade”? Probably “I must trade”. It is a result of your childhood when your parents and teachers told you what to do.

Maybe you think that there is not a big difference between these two expressions. But there is. Using phrase “I must trade” negatively affects your trading.

Effect 1. You feel less responsible of your trading.

When you say “I must trade” you unconsciously understand that somebody told you to trade. Because of that you feel less responsible of your trading. You feel less responsible when you don’t stick to your plan, when you aren’t focused on trading. Because of that you are less motivated to learn from your mistakes and correct them.

You are also less motivated to trading at all. You feel that you don’t manage your life and your actions have no impact on your trading. You are less focused when you make your decisions and when you make your analysis.

Effect 2. You see trading as something unpleasant.

When you say “I must trade” you send a message to your mind that somebody force you to do it. Because of that you see trading as something unpleasant. It is also more probable that you quit trading and find some more pleasant way to make money.

Moreover when you see trading as something unpleasant you don’t use your creativity which doesn’t support your trading.

Do you think that I exaggerate? Do you think that one sentence can’t have so much influence on the results of your trading?

I can give you example from my life. I have been always interested in trading. First time I read about stock market in comics with Donald Duck when I was 8 year old. A little later I read a lot about technical analysis and I started trading.

I thought that I should like it because I love analyzing. I do them all the time, maybe even a little bit too much. I also like taking calculated risk, so trading should have been perfect for me.
But it wasn’t. I always said to myself “I must trade” and I forced myself to trading. Because of that trading was a big unpleasant struggle for me and my results was not satisfying. But I made a break, improved my attitude and now trading gives me fun and the results are much better.


You know the negative impacts of using phrase “I must trade”. But why should you use phrase “I want to trade”?

Because you will feel more responsible of your trading which will give you more fun. You will be more creative, motivated and faster learn from your mistakes.
So do you must or want to trade?

What should you feel after making a trading mistake to make more money?


What do you feel after loss? What do you feel when you know that you made a trading mistake?

Probably some unpleasant feeling like guilt. Why? Because you learned that mistakes and losses are something bad and you should avoid them. But this attitude doesn’t support your trading results.

Why?

Reason 1. Because you don’t learn from your trading mistakes.

Guilt is unpleasant feeling. You don’t want to feel it also when you make a trading mistake. So what do you do when you make a mistake? You defend against feeling guilty. You blame other people, your broker, Goldman Sachs or Barack Obama.

What is wrong with that? When you blame the others then you don’t feel responsible of your mistakes. You don’t learn from them and don’t correct them. Because of that you learn slower.
For example you don’t follow your trading plan because you are not focused. But you don’t want to feel guilty so you say that it is a fault of your boss who gives you too much work. After that you feel better but you still don’t follow your plan.

But you could admit that you made something wrong and take some actions to fix it, for example practice some exercises which will strengthen your attention. After this you would stick to your plan.

Which solution is better for you?

Does it mean that you should feel guilty about your mistakes? NO!!! There is no reason for that. When you learn something new then you MUST sometimes make mistakes. It is a natural process of learning and if you punish yourself then you make this process slower.

Reason 2. Because you learn trading slower.

If you think that mistakes are bad then you may try to avoid them. You may try to avoid challenges and trade safe. But only dealing with challenges and problems improve your trading skills. So if you stop making mistakes then you stop improving.

So what should you feel after making a trading mistake to make more money?

Acceptance. If you do it you will take calculated risks, develop your skills, solve problems and in the long run make more money.

What should you think after making a trading mistake to make more money?


What do you think after taking a loss or when you know that you made something wrong? Maybe “I am an idiot”? Or “I screwed it up”? Maybe you complain: “Why me? ” or “It is unfair”?
Most traders think like this. But it doesn’t support their trading. Why? It depends on situation.

Situation 1. You took a loss but you followed your trading plan.

In this situation you made everything correct. You must sometimes lose to make money. So there is no reason to make a negative self talk. In fact you should make a positive self talk to enforce your habit of following your plan.

You should say something like “I am proud of myself that I followed my plane and made another step to make more money”.

Situation 2. You made a trading mistake.

This is different situation. You made something wrong, probably you lost some money and you should correct it. In this situation you may have a temptation to punish yourself, call an idiot or a loser.

But it has no sense. When you learn something new then you must sometimes make a mistake.
You aren’t also a robot and sometimes you may do something wrong. Of course it is not a reason to be happy. But blaming and punishing yourself won’t help you. The best you can do is:

1. Analyze your mistake.
2. Find out what you made wrong.
3. Find out how you can prevent it in future.
4. Take actions from point 3.

So how should you interpret your mistake? Admit that you made something wrong, that it is OK, and that you will fix it.

You may something like “I made a mistake, but I am only human so it is OK. I will investigate this case, find out what I made wrong and how to prevent it in future”.

Of course after this self talk you should correct your mistake.

Why should take care about your self talk, after making a trading mistake? Because your self talk influences how you think about your mistakes.

If you make a negative self talk then you think about your mistake as a failure and you stop learning and developing your skills. If you make a positive self talk then you follow your plan and learn faster.

So how do you want to interpret your trading mistakes?

Why are losses OK?


Last time I wrote that losses and trading mistakes are OK. When I did it I felt a little bit strange. Probably you too. So it is a good reason to make it more clear.

When you learn something new then you must make some mistakes. Otherwise you don’t develop your skills, you don’t gain experience.

It is not your fault that you don’t know something. There is not anybody who knows everything.

You are not also a robot so there is no reason to feel guilty or punish yourself when you make a mistake.

If you follow a profitable trading plan then losses are also OK. You lose sometimes to make more money in future.

I know that it may be hard for you to accept that losses and trading mistakes are OK. You probably believe that they are something terrible. Because of that you try to avoid them. But it is not good for your profits.

When you are focused on not making trading mistakes then you are less focused on learning trading. Because of that you learn slower.

Additionally when you make a trading mistake then you probably despair, swear or punish yourself. Because of that you don’t learn from your mistakes. But it is the only way to develop your trading skills and get to the higher level of traders.

How about losses? If you try to avoid them then you trade safe, don’t take risky but profitable trades and make less money.

So what do you think about your losses?

Why don’t you accept your losses?


Last time I told you why should accept your losses. But you may still have some excuses.

Excuse 1. It is not right to accept losses and trading mistakes.

Why do you think so? Probably because your teachers and parents told you that. They did it to help you achieve a success. That time you were a small child and you didn’t know what is good for you. You didn’t want develop your skills. You didn’t want to go to school, get good grades. You probably wanted only to play computer games or watch TV.
That time belief that losses and mistakes are bad was correct for you. It motivated you to develop your skills and become better. But now this belief limits your trading. So you must decide if you want to change it or not.

Excuse 2. If you accept your losses and mistakes then you will not be motivated to develop your trading skills and make money.

Why do you think so? Probably when you were a child it was true. That time you were not focused on success. You only wanted to get to a higher level in your favorite computer game. You didn’t care about money because your parents took care about you. You didn’t care about your education because it was boring, not useful and computer games were much more interesting.

But know you are not a child. You are more responsible, you want to have money, you want to be educated. And you will want it even when you accept your loss.
So stop treating yourself as a irresponsible child and apply attitude which will support your trading results.