Trading Psychology

Learn how to build better trading discipline, eliminate overtrading and trade the markets with more emotional control.

Trading Psychology

Ah, the good old topic of trading psychology!

Mastering your mindset and getting a handle on your emotions it one of the toughest elements of trading. 

We often have the best intentions…

A well-laid-out trading plan, rules and a roadmap for the trading day ahead. Then the bell goes, and in the heat of the trading day, we throw the whole trading plan out of the window and break all our trading rules.

This causes frustration and disappointment. 

“I broke my rules again. Why can’t I stick to a simple plan?”

 This leads to classic trading mistakes like over-trading, FOMO, or worse… trading on tilt.

Mastering trading psychology and learning how to control your trading mindset is crucial for any level of success in this business.

Of course, trading discipline is just one pillar of trading psychology.

How you perceive unrealised P&L, missed trades, stops and trading account drawdown all need to be mastered.

It’s not easy. 

But my guess is you’re on this page because you want to get a handle on your psychology, you’ve made the mistakes, taken the knocks and are ready to get things in order.

Good.

Let’s explore trading psychology in-depth together.

I’ll give you some golden rules, and share common mistakes I see in traders. We’ll also explore dealing with trading biases and how to reach the ultimate goal of becoming the disciplined trader you know you can be.

Ready?

Table of Contents

Eliminate Overtrading

Overtrading is taking trades outside of your trading plan. It’s a sign of poor trading discipline and can be a cause of your biggest trading losses. “If only I hadn’t taken that trade” 
You can have the best trading strategy in the world, but if you can’t stick to it…

If you’re an over-trader, make fixing this a priority.

  • Learn how to control your overtrading
  • Identify and avoid your overtrading triggers
  • Build traders discipline and focus

Click here to watch a webinar on overcoming the threat of overtrading, I cover a bunch of tactics you can try to nip this problem in the bud once and for all.

This podcast episode discipline masterclass is also a good listen.

Create a Trading Journal

A trading journal is one of the most important things a trader can do. How can you improve your trading if you don’t measure it? And a good journal is not just P&L…

  • Keep a trading journal that suits your personality
  • Document your trades and trading psychology
  • Audit both your trading performance and emotions

Here’s a webinar I hosted covering trading journal best practices. Also, this trading psychology podcast episode with Steve Ward is a must-listen.

Build a Trading Plan

One of the golden trading psychology rules for traders is to construct a solid trading plan. With a well-written plan, it’s easier to stick to your trading rules and be disciplined throughout the trading day.

  • Construct a trading plan to guide your market decisions
  • Create trading rules you can stick to, build momentum

I wrote a deep dive on how to create a trading plan. 

There’s a webinar, plan templates, downloads and a complete guide on how to build a winning trading plan.

Trading Rules

Trading rules create a structure to your trading day. They keep you focused on the goal, aligned with market conditions and most importantly tell you when to walk away from your trading screens.

  • Create risk rules per trade, day and week
  • Keep you focused on the best trading setups
  • Stop you from chasing a trade

 Here are a few popular trading podcast episodes that will help you with your rules
Adapting or simply breaking rules 
Are you being too hard on yourself?

Then there’s this webinar called Boost your trading performance and whilst not exclusively about rules it’s a really good way of getting your plan and focus dialled in.

How To Improve Your Trading Psychology

Improving your trading psychology and mindset requires a plan of action. Not a trading plan, but a strategy you will follow over a period of time to overcome the biggest challenge.

Firstly identify your biggest problem. Overtrading, FOMO, not sticking to rules, moving stops, trading outside of your risk rules.

Then make that your number one focus until it’s fixed.

No trading strategy work, no worrying about tactical adjustments in your trading. Just a 100% focus on fixing that challenge.

Then repeat and repeat and repeat.

In 6 months’ time, you’ll be a totally different and improved trader.

Check out Transform Your Trading With Drills to see how you can break bad trading habits and form new good ones.

Don’t be the trader who can’t take the FOMO, chases the long entry, gets stopped out only to see it rip higher again.
Markets are fuelled by emotion, fear and greed. Master those in yourself and you’ll be better equipped to observe those peak emotional states in the charts.

Eliminating FOMO

FOMO or Fear of Missing Out is a common trading psychology problem that many traders suffer from.
  • Fear of missing a big market move
  • Fear of missing out on potential profit
  • Fear of not being at the screen when a trade sets up
  • Fear of being right but not making money

The list goes on… but it’s something you can fix!

This little story I wrote about the apple seller highlights FOMO.

Trading Psychology Books and Resources

I’ve compiled a list of trading psychologists I think are worth following and some trading books you might want to read. (some of these aren’t strictly psychology books but there’s always a mindset lesson in there somewhere)

Top trading psychologists
Top 10 trading books 

(I compiled that list before Tom Hougaard wrote his book ‘Best Loser Wins’ which is a must-read for any serious trader)

Improve Your Trading Psychology

Having a good grip on your mindset is not an easy thing to master. learning how to develop your trading psychology into a disciplined trader's mentality takes time and focus.
But it can be done. Build your own trading psychology training program using the resources below.

Trading Discipline, Mindset and Emotional Management

Best Trading Psychology Podcast Episodes

Mastering trading psychology is important, but so is having a solid trading strategy. 

After all it’s no good being able to master your emotions and mindset if your strategy sucks! 

If you are looking for a deep dive into various trading strategies then click to discover popular trading strategies. I cover all different types. Pick ones that suit you and your trading style.

Swing trader? This article covers some basic rules of swing trading psychology.

Prefer to listen to audio?

My trading podcast covers a load of trading psychology topics. (just search for the episodes with “Trading Psychology” or “Trading Mindset” at the beginning. I also compiled a list of the best above)

Finally, the developing trader podcast series is well worth a listen.

That’s where I talk to traders who have just turned a corner in their own trading. 

We talk strategy of course, but the main topic is always how they have changed their trader’s mindset for the better. 

Worth a listen.

Good trading,

Mark Holstead

PS: My daily email goes out each morning at 7.30am, it’s free and well worth a read (if I do say so myself!) 👇🏼