The Lure of Freedom – Trading Psychology

Many of us start trading Options or stocks because we want to break free from the rules of life and the traditional norms that everyone else has to deal with. We want to do what we want, when we want to, but in trading, the very rules and boundaries we hope to one day escape are actually the most essential to long term success. To make it as a trader, you have to be highly disciplined. That’s why the psychology behind trading is such a pivotal topic to consider, and one of the most important skills for you to hone.

What rules do you live by?

It goes without saying that within a society we must adhere to certain conventions. Behaviours and actions are influenced by our upbringing, our societal traditions, our education and religion and even popular culture. We are all motivated and influenced by different things, however it’s often the expectations of others or our concern on how we will be perceived that regulates our behaviour.

If you start to make strange decisions, or not meet the standards set by others, you get called out. If you decide not to turn up to work, remove your shirt on public transport or if you watch Game of Thrones at your desk, you will probably get questions, strange looks or some sort of disciplinary action against you.

As a trader, you certainly use history to pick a direction, but you have to set up your own rules and follow them with discipline.

Traders must set up their own rules

Trading is like playing singles tennis. You are responsible for your own achievements. No one looks weirdly at you if you make weird decisions. In fact, your advisors may even cheer you on as you go down a wrong path, because they will make money off it. In the world of trading you have to be self-directed.

That’s why it’s so important to create rules for yourself as soon as you start trading.

You wouldn’t start a business without a business plan. In the same way, you wouldn’t start trading without a system – although many do.

Anyone could give you a set of rules or disciplines to follow, but for you to have success, those have to become your rules. You have to own those rules. They have to become who you are, what you do and how you behave and that’s one of the most challenging things about trading.

Why Trading Psychology is so important

The concept of trading psychology is pivotal. It’s tempting to follow your instincts when trading, instead of trading mechanically, especially if the market suddenly changes unexpectedly. But it’s important to control your behaviour. It doesn’t matter if you’re right in the moment. What matters is that your trading system will make you money over time, and that’s why you need to stick to it.

 

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