One of the questions traders always ask me is how important is it Trading Psychology He is a beginner.
In this humble old man’s opinion, sound trading psychology is important enough to set consistently profitable traders apart from the rest.
A person’s ability to handle and overcome stressful situations, such as experiencing a drawdown, losing a position, and managing their greed plays a major role in determining the success of a trader.
If you are not psychologically prepared to handle the stress that comes with trading, it is likely that no matter how good your strategy is, you will not be able to execute it correctly, and you will most likely see your account deep in the red.
Just look at the Turtle Traders experience run by Richard Dennis and Bill Eckhart.
A group of traders was taught the exact same system, with the same exact guidelines and principles for risk management. Some have been very successful, while others have floundered.
the difference? Trading psychology.
Some “turtles” could not handle system drawdowns, or closed their trades early and were not able to maximize the best trading setups.
This is very similar to handing the keys to an F1 car to a student driver and expecting him to carve the race track like Michael Schumacher.
Even with a supercharged car, a student driver is likely to lose a race with a professional driving a broken down Honda because he likely lacks the mental fortitude to handle high speeds and sharp turns.
At the same time, we cannot overlook the importance of trading strategy.
You may be the most disciplined and emotionless trader, able to stick to the plan and leave the emotions at the door, but you will likely end up in the red if the strategy you follow in T is bad and unprofitable in the long run.
The key is finding the right balance between trading psychology and strategy.
Trading psychology may not be able to turn a losing system into a profitable one, but it can provide you with the right tools to develop a profitable one.
The right frame of mind can provide you with valuable insights to adjust your trading approach and get better results. In fact, having the right trading psychology can lead to a better trading strategy.
Likewise, much can also be said about the positive effects that a successful strategy can have on trading psychology. You may find it much easier to stick to the plan and overcome drawdowns when you are trading with a system that has been tested and proven.
In order to become a successful trader, you will need both The right mindset (Psychology of Trading) f The right tools (trading strategy). Without either, you are bound to fail.