Trading Psychology: Think Like a Successful Trader

Beginners only care about making money. They are celebrating their WIN’s but they ignore their losses. To become a professional trader you need to understand where and why you lost capital. Many times emotions influence our decisions, that’s why you need to learn how to keep the profits, and how to have a long-term career as a trader.

You need to learn to stay calm during trades and try to avoid emotional mistakes. The cryptocurrency market does not have emotions, but you as a person do, and you need to understand that they will influence your trading decisions.

Let’s look at a few types of situations where we usually react poorly.

1. Greed

I am pretty sure everyone reading this article has had a winning trade. I am referring to a situation where you enter a trade that goes in your direction and you hang to it because you want more profit. No matter how good the trade is it won’t go “UP ONLY”, and sooner or later the trend will reverse and you will lose profit.

Greed is a bit*h, and it is very hard to overcome, you always have this thought in the back of your head “I can be better”, “I can get more profit from this trade”. Successful traders recognize when are they greedy and make a plan based on rational thinking.

2. Quick reckless reactions

I have noticed that traders tend to jump into trades right after they get a signal from their favorite influencer or trading group. You should use this kind of signal to recognize POTENTIAL trades. When someone signals you a coin, you should first look at the chart and analyze it. Is this a good entry, or am I exposing myself too much by entering here?

Again, you need to have a good mindset to wait for trades and not make quick reckless decisions. Make a plan and stick to it, do not let emotions change your plan.

3. Fear

Fear is a very powerful negative emotion and is usually associated with bad decisions. Hearing/reading bad news about a certain asset you are holding makes you scared. Scared traders may liquidate their positions after hearing bad news, sit in cash and may potentially miss out on profit. Nothing to be ashamed of, fear is a natural feeling and bad news is a potential threat to your capital.

However, you should always think about threats before bad news happens and not in the middle of it. You need to think about what are you afraid of and how will you react if that happens.

4. Make a plan

I keep repeating myself, but yes, you need to make a plan and set rules. You need to be prepared for any emotional situations that might come. Make an entry and exit strategy, place your take profits and stop-loss orders, and follow your risk-reward strategy.

Like we discussed in the Risk reward article, decide how much are you willing to risk in one day and stick to that. The same goes with profit, if you reach your target, take the money and go away from the computer.

How to improve

• Study before you start trading, calm your mind and set a routine before you enter the market. Meditation helps you approach the market with a calmer mind. You will never remove all the emotions but you can at least learn how to handle them and reduce irrational decisions.
• Read books. Knowing how trading works, and knowing how humans react to a certain situation will help you make better decisions.
• Learn technical analysis, and try to anticipate how will markets move that day. Traders’ job is to trade based on their knowledge and findings, not emotion.
• Motivate yourself by visualizing winning trades. Find some inspiration, make a list of your goals, what do you want to achieve when trading.
• Visualize winning trades, but be prepared for the worst and think of the worst-case scenario. It will keep you from making foolish mistakes.