Wherever you are in your trading journey, learning how to make better decisions in the markets goes way beyond analysing charts and understanding market trends; it also involves learning how to manage your emotions.
All of this comes down to learning how to master trading psychology. Broadly, trading psychology encompasses the emotional and mental factors – including fear, greed, impatience, and overconfidence – that can influence traders’ decision-making processes.
Understanding trading psychology and how it can impact that way you trade involves developing emotional resilience, discipline, and a strategic mindset.
Psychology can significantly impact your trading activities by influencing your decision-making processes, and in turn, your behaviour in the markets.
Emotions such as fear, greed, or regret may lead you to make impulsive decisions, while overconfidence could trigger you to take excessive risks.
While it is only human to become subject to emotional triggers, traders who are not mindful of their psychological states (and all the biases that come with these) could be more likely to deviate from their trading strategies.
On top of this, psychological factors could contribute to poor risk management, hindering your ability to cut losses or let potential profits run.
When learning how to master trading psychology, traders can look at different types of cognitive biases. These can include biases themselves, as well as effects, fallacies, and sentiment in trading.
You can learn more about each of these trading psychology examples in our comprehensive guides below.
