Trading Psychology

In every discussion on trading, you will often hear that psychology is the most important aspect. I disagree. Instead of delving into psychological jargon, I will explain it with a real-life example.

Imagine you have a trading strategy based on a specific pattern, like the head and shoulders pattern. As a beginner trader, you might expect each pattern to appear exactly the same, with the same number of candles, the exact same shape, and identical distances. However, this is never the case in real life. In reality, when you see the candles moving, you will doubt yourself: “Is this really my pattern or not? Should I take it or wait?” This is one of the problems with pattern trading or technical analysis, but this is not the topic of this article. So, you will trade the head and shoulders pattern with constant uncertainty. Then, if you lose money, you will say, “Oh, this is my psychology, I broke the rules,” every time something goes wrong. You will be locked in a circle of madness. And no psychology book will help you. Do you know why? Because your trading system is flawed.

Numbers, facts, probability, and calculations are what matter. If you build a system that removes the uncertainty about whether you should enter a trade, you won’t need any psychological advice. You will simply execute your trading procedure day after day like a robot, without change, without freestyling. It’s more science than art. You cannot freestyle when building a bridge because it would collapse or cause a catastrophe—everything needs to be calculated—just like your trading system.

You can be melancholic, introverted, or a party junkie—it does not matter if you know how to calculate numbers and build things.