Psychology is the most important aspect of Trading


Below is a nice visual that shows how important Psychology is regarding successful trading of the financial markets. Many traders both new and old are always in search of the holy grail indicator that is going to make them millions. It does not exist and never will. Trading is about each persons self discovery and improvement. It takes years of hard work and dedication and some get there quicker than others, based on their commitment and dedication. As you can see from the image below that Strategy is the least important aspect of profitable trading. Psychology and keeping your impulses and emotions in check during live market action is not easy to do, but it is the most crucial part. It becomes easier over time and as you develop a system and edge. Once you have your system and edge it is important to stress test it through different markets and time frames to ensure its accuracy. The other important part is money management and risk management. Most new traders focus on how much they can gain or profit, instead of focusing on how much they can lose or how much capital they have at risk. A general rule of thumb is to risk 1% a trade, that way no loser can blow your account. If you have poor money management and do not respect risk you will not make it in the long run. So working on yourself and controlling your ego/emotions is #1. In a close second is having great money management skills and a system to manage risk. Lastly, the least important part is your strategy or entry method. But an important question to ask yourself is - What is my edge and why do I enter open new trades? If you cannot answer that question right of way then you should not be trading. You have to have an edge that fits your style and your personality and the confidence and conviction to trust yourself and your edge.

Always a Student. B)
Sign In or Register to comment.
© Copyright - CP Trading Co.
Hosted by TheHostHome