Top 10 tips in trading psychology for better success


The financial markets tend to move on, with no emotions and basically reflect the general investor sentiment. This also means that when it comes to trading, regardless of the security or the asset that you are trading, the price is devoid of any emotion.

As traders, however, emotions can often get the way. As much as we try to avoid bringing emotions to the game of trading, the fact remains that it takes a lot of discipline.

Every now and then, traders do succumb to emotion. The difference between a successful trader and an unsuccessful trader is however the fact that the former understands this and takes steps to keep their emotions in check.

On the other hand, the latter continues to let the emotions dictate the terms of the trade, only to realize it too late. To be successful in whatever markets you trade, and especially if long term growth and profit is what traders aim for, then it is important to pay attention to the emotions when it comes to trading.

It takes a bit of effort in order to work on one’s emotions when it comes to trading. This is where trading psychology can help at the very least to put these emotions in check. Trading is basically a zero sum game. Sometimes, even the best traders will be faced with huge losses and there is no way to avoid this.

But having the right trading psychology is an important aspect that will save you as a trader from making further mistakes.

In this article, we take a look at the top ten tips you can use to help improve your trading psychology in order to be successful. If you have been asking the question of how can I control my emotions when trading, then this is the article for you!

What is trading psychology?

To understand how you can control your emotions when trading, you should first understand what trading psychology is all about. There is a lot written about trading psychology but understanding the meaning of this is a starting point.

Let’s dissect what is trading psychology and see how this can help you in your trading.

Trading psychology is nothing but dealing with your emotions when trading. Emotions play a big role in trading because it is after all money. While you might be trading with money that you can afford to risk, no one likes to lose.

More importantly, no one likes to lose money especially in trading.

But trading is a fast paced game and one loss can bring an onslaught of emotions leading to bad trading decisions. Instead of applying logic, when emotions start to dictate how you trade, that is when you lose control.

There is a big change that you will blow up your trading account simply because one mistake of letting your emotions control you.

In order to control your emotions, traders should focus strongly on a number of things. Most often, traders pay attention to their trading strategy. Of course, there is nothing wrong with this.

But there are also other elements that a trader needs to focus on if you want to control your emotions in trading. In the next section, we will look at ten ways that you can use in your day to day trading that will help to keep your emotions in check and trade with a calm mind.

1. Trade with a demo account, and always keep it handy


Practice makes one perfect, and this couldn’t be further from the truth when it comes trading as well. Having a demo trading account is essential because it help you in a number of ways.

From understanding your trading strategy to dealing with emotions when you are demo trading, this is a good sandbox that traders should take full advantage of. In many prop trading firms, traders who reach their loss limit are often put on the bench and made to trade on a demo account.

This is done so that the emotions cool down and the trader can regain control of their trading activity. As an individual trader, is it a good practice to stop trading when you take a loss and switch to a demo trading account.

One might argue that this would mean having to pass out on trading opportunities that could have made some profits. While this might be true, with your emotions rising, it can be difficult to manage a winning trade or a series of winning trades.

Switching to a demo trading account until you calm your mind is a great way for you to get back into the game at no further risk to your trading capital.

2. Make a plan

Having a plan doesn’t simply mean to make a mental note of things, but to actually write it down. This will ensure that during moments when you see your emotions writing, looking at the plan you wrote will remind you and can potentially calm your nerves.

Writing down a plan, which is different to having a trading plan is basically making a note of things that you should not do. Writing down your targets such as reaching a certain amount in profits and setting a limit to the amount of losses you take on the day is a great way to constantly remind yourself.

Using such a practice will help you develop as a professional trader. It will also ensure that you are constantly grounded, and the notes can be a great way to remind yourself to take a break.

The best way to have a plan is to make note of the securities or the currency pairs that you will trade and also the potential trading opportunities that you have in mind. Having a plan on the profits and losses for the day will be a reality check for you in many ways.

The job doesn’t quite end there. Revising your weekly or daily plan at the end of the day is a great habit to develop. Eventually, this will help you to reevaluate your trading decisions and understand where your shortcomings are.

By doing so, you do not get too emotionally involved when trading the markets, which is what trading psychology is all about.

3. Know when to walk away

One of the things about trading is that a few winning trades can give us the emotional boost. This would give a false sense of confidence that the trader is invincible and tricks them into taking unnecessary losses.

Many traders would know that the markets have a tendency to give profits and also take them back. Usually when the markets take back the profits you made, it also dents your trading capital.

Chances are that you will end up losing more than what you gained. Knowing when to walk away is a sign of discipline. The only way to build this discipline is by starting with a plan which we discussed in the second point.

If you have reached your daily or weekly profit limit, it is time to close down your terminals and do something else such as evaluating how you were able to reach your profit limits.

Discipline is one of the most important things when it comes to trading psychology.

4. Improve yourself, improve as a trader

One might think that trading is all about the markets, the trading signals that you get from your trading system and managing your trades. But there is more to this than just trading. To be good at trading psychology, you need to focus on your overall self as well.

When you are in a good state of mind, you can find that you are better able to control yourself. To do this, you can focus on other activities such as meditating for a while or doing some short exercise. Well, anything that can take your mind off trading and allows you to focus on yourself.

This is a great way to build your trading psychology because it helps you to put things in perspective. Building a routine is also a good habit rather than staying glued to your trading terminals all day.

Reading is also a great way you can improve yourself and allows you to take a break from trading. Reading books about trading strategies, biographies of traders are simple yet efficient ways that will allow you to relax but also learn something new at the same time.

Trading is a skill and the only way you can be successful is if you can improve your skills. This means acquiring knowledge about the markets and what you trade. Sometimes, you can find interesting nuggets of wisdom from books that are not at all related to trading in any way.

This is a great way to keep your mind open to new opportunities, information and knowledge.

When you are relaxed and use your time off from trading to good use but doing something that will also help you develop as a trader, you will find that you are able to better control your emotions.

5. Lose with dignity

People react differently to losing. While some choose to walk away, others get sour and try to get back. The markets are certainly not something that you should try to get back at. One of the primary reasons why losing is so difficult is because that is how we condition our minds.

Losing brings with it, negative connotations. As a result, from a trading perspective, traders end up trying to win. What happens next is that in order to get back at the markets and to recover from losing to winning, you will end up risking more and probably lose more money.

Some traders might argue that they have managed to bounce back after losing. However, this is merely a gamble and when you bring in emotions to trading, it can be even more difficult.

One of the ways to deal with losing is to look at your trading plan. When you set a stop loss on your trade, you are essentially taking on the risk. A stop loss is subtly telling you how much you want to lose.

Now when emotions come into the picture, it can be a different story. The stop losses are no longer considered, and traders pin their hopes, hoping that the trade would reverse.

There is a commonly used phrase in trading circles which is to cut your losses short. This basically means that admitting when the markets prove you wrong and you cut your losses while keeping your dignity intact.

Quite often, you will find that the markets will hit your stop loss and then reverse direction. But this should not be the reason why you should do away with trading with a stop loss.

In simple terms, the amount that you risk on a trade, should remind you that that is an amount that you are willing to lose.

6. Accept your winnings with humility

On the flipside of things, wininngs can evoke another extreme response. When you essentially win a trade and it closes with your target level being hit, it can be a great confidence booster.

You might even find that your ego is on a high. This can trick you into thinking that you have mastered the art of trading. This is when you lose control and start trading, while ignoring your trading plan.

On the contrary, a good way to control your trading psychology when you win is to simply go back to your trading plan and assess what you did correctly. This can be a great way to not only build your confidence but also start to put the little pieces of information together to get better in your trading skills.

7. Overtrading is a risk!

Overtrading is one of the biggest reasons why traders blow up their trading accounts. The thought of having one more trade will eventually lead you to losing your entire trading capital.

If you look at many forex brokers for example, you will notice that you get quite some rewards when you reach a certain trading volume during a given time. While this can lure gullible traders, professional traders know when to stop.

Overtrading happens you ignore your trading plan and ignore your trading psychology. Your emotion is what dictates you from then on. While it can be tempting to take on one more trade because you are convinced that the markets are presenting you with a great trading opportunity, you are in essence putting your money at unnecessary risk.

Overtrading is often seen among scalpers and day traders. This is because such trades are short in duration, it can leave the mind to wander. This is when the trading plan is ignored, and the trader gets sucked into the markets with emotions running high.

Add to this recipe a few winning trades and it is only a matter of time before you take that one big hit that will essentially wipe out the profits you made for the day.

8. Have the right mindset

Believe it or not but having a right state of mind can do wonders in your trading. Most traders don’t pay attention to this. But a fatigued mind can be easily distracted, and you might get reckless with your trading. We know what happens when you trade recklessly.

Having the right mindset starts with firstly getting a good rest. Just because the markets close a little under midnight where you live doesn’t mean that you need to spend endless hours staying awake.

Lear to take good breaks and drink plenty of water. Taking short breaks and building a habit of positive affirmations can turn out to your advantage psychologically. This in turn will help you to cope with your emotions much better and will help you to get a grip on trading psychology.

Watching motivational speeches, reading inspirational quotes and having a positive and a calm environment are just some of the ways you can have the right mindset which will help you in your trading journey.

9. Be a self-critic and be honest at it!

With trading, there is no one really around to tell you how you have been progressing as a trader. Therefore, it is important that you are self aware and critique yourself at regular intervals.

This doesn’t mean that you should only focus on the negatives but give yourself some encouragement and positive words when you have done good. Keeping a trading journal is just one part of it. But it is also important that you evaluate yourself at regular intervals to see how far you have come.

One way to do this is by setting goals for yourself. For example, you can set a goal that you will make only x number of trades during the week. A few months later, evaluate yourself and with the help of your trading journal see if you were really able to achieve this goal.

There are a number of other aspects that you can follow by using this simple approach of self evaluation and critique.

10. Know what you trade

While this might come in at the last, it is important nonetheless. If you do not know what you are trading, then it can be difficult to keep the right mindset and keep your emotions in check.

One of the key things to building a good trading psychology is the fact that the more aware you are about the markets that you are trading, the higher the chances that you are more confident about the markets.

Do not mistake confidence as an emotion, but confidence in this context mean that you are aware about what is happening in the markets, how the securities that you are trading tend to behave and what are the risks that are prone to trading the securities in question.

Most traders often ask questions like the best stock to trade, or the best forex currency pair to trade. Asking this question shows the immaturity of the trader and how ill-prepared they are.

Even if the trader is strong in their trading psychology and do a good job about keeping their emotions in check, if you do not know what you are trading, you are essentially trading in the blind.

Sooner or later, something will give, and you will end up facing huge losses.

Trading psychology for better success – In summary

To summarize, trading psychology is an important aspect that will determine your success as a trader. While many traders do not identify this, it is an essential skill and falls in the same level of importance as your trading strategy and risk management.

Trading psychology is often brushed aside due to the fact that it can be hard to quantify. However, if you pay close attention, you will see that your emotions play a big role in determining the outcome of your trading journey.

There are a lot of things to consider when it comes to trading psychology. While many often say that fear and greed are the two most important factors when it comes to keeping your trading emotions in checked, there are a number of other things as well.

For example, if you are tired or sitting in a place that has a lot of distractions, chances are that you would not be able to concentrate fully and can let your emotions do the talking rather than your trading decisions.

A good trading psychology is just as important as having a good trading strategy and a risk management plan in place.

Having said that, it is important to note that the markets are merely a reflection of other investors and traders just like you. Therefore, while we talk about trading psychology, it is important to note that the markets can be irrational at times too.

This is when even your trading psychology or trading plan will not be of any use. But that is how the markets work. The trick is not to let the markets get to you, especially when you lose. That is where you can end up making the biggest mistake and set yourself up for facing further losses.


About Me

I'm Mike Semlitsch the owner of My trading career started in 2007. Since 2013 I have helped thousands of traders to take their trading to the next level. Many of them are now constantly profitable traders. 

The following performance was achieved by me while trading live in front of hundreds of my clients:

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