Psychology of TradingThe psychology of trading really comes down to negative thinking versus positive thinking, which may sound simple but often simplicity is the key.  Quite often traders will lose faith in the latest indicators or methodology they just purchased because that is the easiest route.  It’s much harder to change the trader than it is to change the indicators.  In my last few posts on trading psychology, I have explained how the US Army uses the power of positive thinking to transform civilians into soldiers.  Let’s take a look at one of the statements in the Soldier’s Creed:

I am disciplined, physically and mentally tough, trained and proficient in my warrior tasks and drills.

Now anyone will agree that when a civilian goes in they are not typically, disciplined, physically or mentally tough.  Their drill sergeants teach them these skills.  The drill sergeants are their mentors tasked with the job of training and transforming these civilians into proficient warriors with never ending drills and exercises.  But the statement is constantly embedded into the civilian’s brain.  Why?  Because training begins in the brain!

Psychology of Trading – Success begins in the Brain

Traders, both new and old, will go through negative thinking periods.  I have been trading for over 15 years and this negativity can still affect me if I am not on constant state of alert to the thoughts that are creeping in.  They typically look like this (click to expand):

Psychology of Trading - NegativeAnd, if trader’s don’t catch it, then what happens:  FAILURE

The art of controlling your thoughts is the difference between success and failure — regardless of what field you are in.  The reason is that you are impressing on your subconscious to fail.  The subconscious is your servant and does exactly what you tell it to.  In this case, you are asking for failure so it proceeds to serve up failure.

Success in trading comes from stopping this process.  When you understand that the subconscious is your servant, then you can use the power to produce positive results.  You must switch the negative words like:

  • I can’t
  • I don’t
  • I never
  • I need

To positively charged statements that use power words like:

  • I am
  • I can
  • I do
  • I expect
  • I deserve

Instead of the negatively charged thoughts from above the new thoughts would look like the following (click to expand).

Psychology of Trading PositivityRemember, what you impress on your subconscious (which is your servant) is actually the outcome that you want.  The subconscious mind has no decision making skills — it simply serves you.  While this may seem simple, it is actually the hardest part of trading.  But above your indicators, your markets, your charts, is the internal psychology of trading that will make you either succeed or fail.