Is psychology your biggest weakness in trading?

I’ve learn dozens of buying and selling books. Some useful and a few not so useful. Nonetheless, one frequent theme runs all through all of the books I’ve learn on buying and selling: Buying and selling Psychology.

Some buying and selling guru’s say that buying and selling psychology makes up 90% of your buying and selling success while your system and guidelines and cash administration make up a mere 10%. While this can be a bit drastic, I do consider that psychology is the world the place merchants battle probably the most. Most newbie merchants focus extra on purchase and promote alerts and order execution, whereas skilled merchants will counsel that buying and selling psychology is the world that they need to concentrate on as a way to change into constant, worthwhile merchants.

It’s a lot more durable to look inwards to enhance your buying and selling than to concentrate on exterior components. Merchants would slightly seek for that excellent indicator or that Holy Grail system than concentrate on their very own weaknesses and psychological make-up as a result of it’s tough, actually tough.

As particular person merchants we’ve got two methods of dealing with this. Firstly, we will attempt to overcome our the psychological points which are holding again our buying and selling or we will automate our buying and selling in order that psychology performs no half in any respect. It’s a alternative between overcoming our weaknesses and eliminating them from our buying and selling.

Overcoming psychological points in buying and selling is an extended and exhausting course of that one can enhance and management however by no means get rid of solely. You possibly can search the recommendation of a buying and selling coach or take a course or learn books, however finally studying to manage your feelings and psychological state will probably be a life lengthy journey of discovery. We’re notably vulnerable to psychological weaknesses after we are drained or underneath stress. Buying and selling underneath these situations makes it much more difficult to cope with, nevertheless because of the nature of the market we frequently commerce in these circumstances.

By constructing an automatic buying and selling system you get rid of human error and psychological points out of your buying and selling. An automatic buying and selling system is one the place you construct and take a look at your buying and selling technique after which as a substitute of manually making the buying and selling selections based mostly in your guidelines based mostly system, you construct a easy automated program to run your system mechanically. This eliminates buying and selling errors corresponding to getting into the inaccurate lot measurement or restrict worth, forgetting to enter a cease loss or closing a commerce too early. Extra importantly although, it eliminates the chance so that you can transfer your cease loss out, or enter a commerce that has not been confirmed as an entry by your buying and selling system. Worse nonetheless is driving a dropping commerce for worry of realising the loss. Merchants can rationalise unusual behaviour within the warmth of the second and simply sabotage their outcomes by deviating from their guidelines based mostly buying and selling plan. Your auto buying and selling program won’t ever deviate from the foundations that you simply set and by no means get fatigued. Your auto system does not get harassed, grasping or fearful.

Whether it is true that buying and selling psychology makes up 90% of your buying and selling success, then why not take away it out of your buying and selling by introducing automated buying and selling software program? This lets you concentrate on the opposite 10%; the precise guidelines based mostly buying and selling system that each dealer wants as a way to achieve success. That is the enjoyable half! Merchants get pleasure from constructing and testing buying and selling and cash administration methods.

Focus your efforts on growing a water tight system that fits your wants and use automation to implement your plan. You will cut back your error charge and enhance your buying and selling outcomes. The less errors you make the higher dealer you may be.