A PALATABLE TUESDAY

THE PSYCHOLOGY OF TRADING 

Mastering the psychology of trading is one of the most difficult, yet under appreciated, elements of learning how to trade stocks, regardless of whether one is trading part-time from home or trading professionally for a living.

While there are many books, websites, and resources discussing stock market trading strategies, very little has been written specifically about the psychology of trading, particularly for active short term traders.

This could be due to the fact that most technical traders, such as daytraders and swing traders, tend to be more mathematically oriented, and therefore less interested in “soft” subjects such as psychology. Yet, to ignore the psychology of trading will almost guarantee your failure in learning how to be a consistently profitable online trader.

The only time stock traders and investors turn for help on this topic is after they have blown up their brokerage accounts and have finally hit rock bottom. However, in this article, I will improve your trading education by explaining the key psychological emotions to be aware of, and how to avoid the common pitfalls that investors and stock traders commonly experience while learning to trade.

Many stock trading sites recommend that new swing traders “paper trade” to gain experience by practicing in a simulated account. While this may be beneficial for learning to spot technical patterns and entry points, it is impossible to simulate the psychological side of a trade unless you are actually putting your own hard-earned money at risk.

In order to master the psychology of trading, a short term trader must work his way through hundreds of trades in order to identify his personal psychological strengths and weaknesses.