Thread by @3Stocksaday

MINDSET
Trading psychology may sound like a made-up term but it is a very real thing. Financial
markets have no emotions, but we as people do. To achieve a long-term career as
traders,

it is very important to cultivate a mindset in which we can remain calm while
trading and avoid succumbing to emotional reactions.
The following are some of the examples of mistakes that we make while trading and
whose cause is psychology: Taking bad trades
Cut losses too late

Not taking good trades
Taking too much risk
Don't take profit on winning trades

THE EMOTIONS OF TRADING
Overcoming emotional barriers is one of the first problems that people who start
learning to trade face.

Traders who control their emotions and ego have a great advantage over those who do
not. The reason is that their trading decisions are based on objective market realities,
rather than subjective emotions.

The way a person deals with emotions has a great influence on whether or not they are
a winning trader.
Some of the most important are for example fear and greed. The response to these
emotions can make us make decisions automatically and simplify the reasoning
processes

that we should carry out.
FEAR
Fear is one of the strongest emotions when we trade. Part of the idea that fear is a
natural reaction to what we perceive as a threat, and in this case we are talking about
losing money or not getting a potential profit.

Fear in trading manifests itself in various ways and is the cause of many mistakes we
make.
For example, the fear of losing can cause us to delay the sale of a losing trade, which
will often lead to greater losses.

AVARICE
Greed leads to numerous impulsive decisions

that must be avoided.
Traders who are influenced by this emotion often do not adhere to sound principles of
risk control and financial management.
It also leads us to a "gambling" mentality, in which we operate without set rules,

making
impulsive decisions and looking for big quick wins.
HOPE
Hope is often closely related to fear and greed. When we have a losing trade and feel
hopeful, we tend to delay the loss; We give you more space to see if our position
recovers which can lead to additional losses.

OPTIMISM
Being optimistic in general is a positive trait. The problem comes when optimism is
much higher than usual, due to a series of winning trades. We have an excess of selfconfidence that can lead us to take more operations than we should and use excessive
risk.

FRUSTRATION
Frustration in an emotion caused by making various mistakes by the aforementioned
emotions. When we don't cut losses on a trade, break the rules, risk too much, and end
up losing more money than we should, we start to get frustrated.

Frustration reinforces all the negative behaviors the trader is struggling with and
intensifies the problems.
IMPROVE YOUR DECISION MAKING
Ideally, we should operate like a computer based on facts and data, not emotions.
Mastering psychological factors takes time,

since it requires working on this facet in a
specific way. Therefore, I leave you a series of tips that can be useful so that the
influence of your emotions is less while you improve your mentality.

Operates under an adequate state of mind
If you are constantly opening trades in a hurry while dealing with the daily tasks of life,
you are likely to approach trading from a nervous and rushed state of mind.

Try to prepare each trading session (be it daily, weekly, etc.) in advance and when you
go to trade, do it in a state as slow and clear as possible.
If you do not succeed, one of the possible causes is the type of trading you practice
does not match well with your lifestyle.

It is not possible to remove emotions from the equation, but this can help you reduce
potential harm when you observe yourself making hasty decisions.

IMPROVE YOUR TRADING KNOWLEDGE
Having a solid base of knowledge about trading will indirectly improve psychology.

There are always new things to learn, be it about technical analysis, performance of
indicators, technical analysis, study of new markets, risk management ...
On the one hand it will lead you to make better decisions when trading, which is already
a positive factor in itself.

But also, knowing in depth how trading works, can make it
easier for you to carry out losing trades or losing streaks that are more extended over
time.
MAKE A TRADING PLAN
One of the ways to strengthen your mindset is to make a trading plan and stick to it.

A trading plan is like a roadmap in which you specify your operations in advance. In it,
we determine the entry, exit, position size and many other things.
Taking time to do it already implies that we are more likely to adjust to it.

But it also
prepares you in advance for the different situations that may arise.
The other important part about carrying out a trading plan is to respect it and evaluate at
the close of each operation whether we have complied with it or not.

BE AWARE OF YOUR EMOTIONS
A first step in mastering emotions is being aware of their presence.
When we are operating and emotions such as fear or greed appear, they give clues
from the beginning that can be recognized.

At first it can be complicated so we have to be attentive to our thoughts and analyze
them. Basically on the one hand we need to know what types of emotions occur in
trading and then see if we can be under their influence.

For example, if we have an open trade and the price turns around towards our stop
loss, we have to be vigilant against very insistent thoughts like "to see if we are lucky
and the price turns in our favor"

or "I am going to extend the stop loss to see if the price
has time to react. " This leads us to the conclusion that we are beginning to be
dominated by a certain fear of losing the operation and hope that the market will do
what we want.

The idea is to start being aware of them in order to be able to correct them in the future.