The Psychology of Trading

July 29, 2016

“Once you learn the basics of trading, you will realize that the hardest part is NOT the mechanics but handling the EMOTIONS” – @modern_rock

Most traders spend most of their time looking at the charts, looking for setups to enter the market, but have you thought it is not just about that? Let’s take a step back and out of the charts and look at the bigger picture of trading. Have you ever wondered why you had a losing streak?

Here I will give you a brief introduction to trading psychology.

What is trading psychology?


Successful market trading is mainly about conquering trading psychology. It is about the amount of self-control and discipline to take to repeat the same routine in applying rules of trading.

Anyone can acquire the know-how for analyzing the market. That is what beginner always does. They focus too much on analysis but professionals are aware of trading psychology, their own feelings and the mass psychology of the markets.

New traders gain some knowledge, they win, their emotions kick in, bend their own rules and goes into self-destruct mode.

HOPE. This is also another major problem with most traders. They hope their losing trades would go in their favor too oftentimes. It’s like they are married to their trades. Not letting go what hurts them.

“Bend your view to the charts, not the charts to your view.”

The usual emotions involved when a trader takes a trade includes :

– heart thumping
– anxiety
– nervous
– frustration
– revenge mindset

It is normal to feel all these. The market is set for you to feel this way. Which is why to be in those 5 percent traders means conquering and mastering trading psychology.

Why do we get the feelings above?

– Your trade size is beyond your risk level. Often we get furious when we trade a big size position and the market goes against us.
– You entered the market with gut feeling without assessing your own trading plan or waiting for the setup according to your system.
– You anticipate the market to go your direction.
– Over-trading.
– Last but not least, you trade with the money that you needed.

(CEX.IO blog)

Trading psychology and risk management play the biggest roles in trading. It is the most important elements for probability in trading the market. However, this is the topic that most traders shun away from. Most new traders only focuses on the money. I’ve always had this same mindset since I started trading. We all treat investing more like a casino than a business and want to get rich quick. Yes, it can be a money-making machine, only if you know how to work and develop your own system and follow your own trading plan. Discipline is one thing all successful traders share.

When you create your own trading system to follow, you actually created a process of understanding yourself. Understanding how and when to take a trade according to the rules that you’ve set. It is about understanding your risk appetite and developing your discipline.

You have to be unemotional in every investment decisions that you are about to make and how good you are at risk control. Traders often does not cut their losses early and let their winners run which is the whole point of trading, but human psychology repeatedly gets in the way. But if you want to build a long-term sustainable portfolio, this is the one lesson all traders needs to learn.

It is always about staying discipline and only taking trades that are within your trading system/rules.

It is always about patience – waiting for trade setups.

It is a mental resistance – NOT taking trades that is not in your system; NOT missing trades that are in your system.

Successful trading is all about consistency.

Imagine if you go against your trading rules once, believe me, you will most likely do it again the next time. Hence, it is not going to bring consistency in your trading which is the main reason why most traders fail in trading.

Why this is different than the professionals? Because they treat trading as their business.

Therefore, you have to develop a good habit in keeping your discipline in check, to keep practicing the above values and proper trading psychology. It is time to improve the game further and not just trade blindly.

Trading is about self-analyzing, discipline, self-control and executing your own trading system.

Confluence is the key. Confluence means many reasons and not only one reason to enter the market. Confluence makes you picky, confluence removes over-trading. Therefore eliminates emotional trading.


Nezyrin Iklram is a full-time trader and a portfolio manager for Freeman Capital Management LLC, dealing with FX since 2012. He’s also a technical analyst offering free analysis and signals to a local Malaysia FX community (Signal, Analisa & Berita Forex Percuma) consisting of 30,000 members.

Nezyrin began his financial career as a bedroom trader where he worked his way up in FX trading market. In 2015, he joined Freeman Capital Management LLC as one of the founding member and helped FCM, a start-up investment firm, in its early days.

Through his contributions to the local FX community, he has shared lots of info with respect to trading. He’s educated a lot of traders. One of his favorite discussions is about the relationship between trading market and trading psychology. He’s caught many attentions when he shared a lot of profitable trades through free signals offered by him.

He is also in the process of setting up a branch of Freeman Capital Management for Asia and Europe market, and also providing some classes through which he can educate the people in Malaysia about forex trading. You can reach him on Twitter at @nezyrinFX.

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