One of the most important things to consider when it comes to trading psychology is to become self aware. The trader that is self aware is the trader that has a clear head. Emotions in and of themselves are not bad: many times, emotions give insight into trades that can cause a trader to dig deeper and make sure the move is a good one. But if a trader simply moves from emotion to emotion, and trades accordingly, then the emotion becomes a liability.
By being self-aware, traders can combat the times when emotions become harmful rather than helpful. Self awareness is simply assessing one’s self and paying attention to emotions. If a trader is fearful, he or she should know why or at least acknowledge that the fear is there. Then, the trader can turn to their trading strategy to assess if the fear is valid or whether it is simply “butterflies.” This cuts down on anxiety in the middle of trading, and can also help traders to assess mistakes and learn from them. By being self-aware, traders can look back on mistakes and figure out where they went wrong. They can then fix those mistakes, and move on in their trading career.
There are a few words that important when considering trading psychology, especially when talking about self-awareness. Defining and learning these words can help a trader become more self-aware and knowledgeable about trade psychology. They will also help traders to create good trading strategies: is the plan focused, logical, organized? Is the trader patient, and realistic? A good trader can answer these questions, and the following words and their definitions are where the answers begin:
Ability – to take a loss without becoming emotional.
Confidence – to believe in one’s self and his/her trading strategy
Dedication – persevering through losses and gains alike in order to become the best forex trader possible
Discipline – to remain calm and unemotional in a realm of constant temptation (the market)
Flexibility – to trade changing market conditions successfully.
Focus – to stay concentrated on one’s trading plan and to not stray off course
Logic – to look at the market from an objective and straight forward perspective
Organization – to forge and reinforce positive trading habits
Patience – to wait for only the highest-probability trading strategies according to one’s plan
Realism – knowing that traders don’t get rich quick or easily, and understanding the realities of the market