Market Psychology: How to Develop A Trader Mindset

Your mindset and mental conditioning is key to your success. Learn how to be the master of your emotions and you’ll gain an edge in this market.

Growth Mindset > Fixed Mindset

Your mentality when trading Forex is by far the most important topic in not just trading but in your life as well. Us humans are emotional by nature, when we receive something of value (money, reward or gift) our brains release dopamine and we tend to be happy about that, but when we lose something of value, we feel a sense of loss or abandonment.

This taps deep into our fears that were developed in childhood, those are our deep rooted emotions.

In trading you can just picture how it is when you lose a trade that your analysis was sure to be in your favor. The ideal reality you should aim to build towards is mastering your own emotions. You need to understand that you have to work towards shifting your current state of mind to one of accepting and not allowing your emotions to rule you. Be logical in your choices and never allow anger, envy and disappointment cloud your rational judgement.

Trading and investing is a 100% game.

80% of this game is your psychology and the remaining 20% is the skills that you’ll learn. The skill can be easily learned with the right focus and discipline.

The reason why 70% of traders and investors lose money is because they believe its a quick way to make money.

Making money and growing your wealth in the markets should be seen as a journey, not a quick way to make money.

The two darkest emotions you’ll experience.

Fear & Greed

The fear you’ll face

When you are in a live trade and you see on your trade balance is in red. Most traders would probably react in panic and justifying a reason to liquidate all of their trades and quit in fear of losing it all.

Refraining it from taking any more risks that may be associated with that trade losing.

Traders need to understand what fear is and why it is affecting them in all areas of life.

How to properly deal with fear?

One word, Acceptance.

Accept the fact that you will have losing trades every now and then. It is better to just look at it from a different perspective, when you lose a trade and money you should analyze why the trade lost and turn the loss into a lesson that you reference back to and teach others.

The Greed you’ll feel

Greed is our worst enemy. It is hard to over come because when we have a taste of a profits that comes with good trades, we will always want more.

Typically you will notice in your early stages you’ll get overly confident and over trade your accounts.

The market offers a deep risk to your account, and it is unpredictable.

How you can properly deal with greed?

To avoid the 70% of traders who fail. It’s suggested that you make yourself a trading plan. Taking into account your end goal and how much of a % increase in your account you need every month to reach that goal.

Building the discipline with trading plan allows letting your money compound much faster.

A proper trading plan would be conservative, aiming for 2% — 10% per month is average and realistic.

I’ve personally witness friends make anywhere from 40%-100% in one month. But that does NOT always happen nor is it the case.

Luck does play a big role, but as does preparation and discipline.

Actionable Rules For Mental Conditioning

The following are actionable rules that you should incorporate in your trading.

Setting up your trading rules

In order to become a successful trader, you must set rules and follow them.

There are different types of rules that you have to consider adding.

  1. Turning off your phone, logging out of Facebook, getting into a distraction free zone.

2. Writing in your journal how you are feeling prior to entering the markets.

3. Meditation. Focusing on just your breathing, the goal here is to enter the markets with a clear level head.

Open a demo account for practice

When trading on demo, emotions do not get in the way as they do when it’s a live account. This is because it’s not your money; it’s just a number on the screen with no real value to you. The only difference is when you go live you are likely to lose that value you put into the trading account, and us being so emotional about losses we tend to act indifferent from how we are supposed to act as professional traders.

Losing is something that every professional accepts.

Treat your demo account as if it was real.

Ask these questions before placing a trade, in both demo and live environment.

How much profit are you aiming for?

What price on the chart equals to my profit target?

What is the max amount of money you are willing to lose?

What kind of set ups are you looking for?

What is your stop loss set?

How confident are you feeling about this trade & why?

Our mission is to teach traders to be fully independent and learn investment management skills. We ingrain into our members an entrepreneurial mindset and help build discipline in trading and a passion for the markets.