The Importance of Trading Psychology

The Importance Of Trading Psychology – Why Psychology is so important in Forex Trading

By far, the most important part of trading is the psychological aspect. This is because everything you see on the chart relates to how market participants feel about a financial asset. There are only 2 major feelings that a trader can have, fear and greed. These emotions control everything you see in the marketplace and are a huge reason as to why algorithmic trading has made such inroads into the financial markets. One of the most difficult things for a profitable trader to do is take the emotion out of trading.

This is why you often see bubbles form, because of the emotional roller coaster. Greed is a powerful aphrodisiac when it comes to finances, making people jump into a market hand over fist, even after it is far overbought. This is also what you get pullbacks in the marketplace, and sudden collapses as fear takes over. It’s all based around psychology. When using technical analysis, you assume that the market has everything priced on the chart as to what it believes. When you see a sudden move in another direction, you know somebody has gotten fearful. This is the same as when you see a market that’s overextended in parabolic, people are becoming greedy, and therefore reckless.

Over the next several videos, we will take a look at some of the most common psychological challenges that you will face as a trader. This is without a doubt one of the most complex and difficult aspects of trading, but it is one of the most rewarding. This is because once you understand your own psychology as a trader, you can often take these lessons and apply them in the real world. In a sense, not only can you profit financially, but you can also profit in other parts of your life as well.

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