How to train your brain for trading?

According to Welz, “trading is the most insecure business you can be in,” but the main issue is that most people like and require security in all its forms. He claims that no other career generates such strong emotions and reveals so much about our personalities.

Having the correct mindset is crucial to potentially trading successfully. However, nothing is more difficult than breaking free from the influences that initially shape our mindsets and control the way our brains work. Parents, relatives, friends, the media, books, society, the environment, and more all have an impact on us. By the time we begin trading, all these factors often reinforce ineffective or poor trading patterns. Attempting to change these tendencies is both scary 和 challenging.

You must acknowledge the importance of psychology and emotions in trading and take proactive measures to mitigate their effects if you want to adopt a proper trading mindset. You should also maintain a routine that is both objective and disciplined when trading. Keep track of your trades and their outcomes, with pre-established entry and exit points that you can adjust based on reliable criteria.

Why traders undervalue psychology

Understanding the ubiquitous role of mental health and brain function is essential to understanding Welz’s methodology. Psychological strength is crucial for successful trading. We repeat our behaviours and approximately 95% of our actions are subconscious. This replication all too frequently results in the wrong or even disastrous actions being repeated.

Based on an experiment, 120 traders were provided with a system that had statistically demonstrated its intrinsic value in 19 out of the previous 20 years to back up this claim. Following a test year, it became clear that 119 of these traders had fallen victim to the system because of their own mental flaws. All traders except one had the incorrect thought processes.

“It all starts in the head,” Welz asserts. Although the system was effective, the traders’ mindsets and attitudes made it less successful.

Since most traders are men, they typically believe that psychology is not the most important factor. They believe that simple ideas of being logical, knowledgeable, and experienced are more important. But if the brain is not properly programmed and tuned, knowledge, and experience are useless. What then can we do to train our subconscious and thoughts to behave appropriately?

How to develop control & productivity

Acquire new trading knowledge

Breaking free from an emotional trading situation can be enjoyable and financially rewarding when you learn a new trading technique. Perhaps you’ve been interested in finding out more about RSI and MACD indicators, or you’ve wanted to understand how Credit Spreads and Iron Condors work. So, set aside an hour each day to study those subjects.

IronFX offers a wide variety of educational resources, including webinars, podcasts, video tutorials, and more. When you fully understand a new subject, your perspective on trading will evolve to incorporate what you have learned. This could potentially end the emotional trading cycle.

Conduct some extensive market research

Trading can become emotional at times because you’re unsure of what to do next. If so, it’s possible that you’re stuck, and that’s acceptable. Step back and explore some subjects about which you might have questions. With a focused effort, you can pick up new skills and gain confidence in your trading, allowing you to put your head back in the game.

Because the market is always changing, there is always a new angle that you are unaware of that could help you refocus your efforts and explain why you are trading based solely on emotion.

Finding a new newsletter or investing authority that you haven’t heard of before is a simple method to add some spice to your research. You might come across something that radically alters your perspective on trading, or you might come across something with which you disagree completely.

In any case, expanding your knowledge of the market and gaining fresh insight will help you become a more knowledgeable trader with a wider perspective than you were previously.

Practise trading

Before investing real money, you should paper trade any new strategies or indicators that you wish to use. Although paper trading isn’t flawless, it offers a safe haven where you can feel at ease taking risks with your trades without losing any money. IronFX enables traders to trade on a demo account to practise their strategies under real-market conditions. 

Build a solid trading plan

This could be a great time to prepare a trading plan and set some specific trading goals if you are always asking yourself why you keep trading the way you do or why your strategies aren’t helping you reach your goals. Spend some time calculating and quantifying your goals for every trade you make.

Do you employ hedging? Are you attempting to profit from a significant market shift? In an effort to lower your average cost, are you scaling a position? You can better understand the “why” behind your trades by asking yourself these questions.

Now that you have a direction for your trading business, list some benchmarks that will enable you to reach your objectives, like achieving flawless execution or increasing your level of familiarity with various orders.

Examine five brand-new charts

Because they invest a lot of time in fostering emotions and see their performance as a reflection of their skill, many traders form an emotional bond with the stock, ETF, or product they are trading. Find five or more brand-new charts of companies that you have no emotional attachment to. This habit can be counterproductive.

Once you’ve compiled this updated list of companies, objectively examine the charts and note the bullish and bearish signals for each company’s purchase or sale. By examining both sides of an issue without taking an emotional stance, you can teach your mind to assess a position objectively.

A possible strategy for this would be to list three bullish trades for each company along with your predictions, and then list the same trades from a bearish standpoint. Take a close look at these five charts and practise trading in conjunction with your research to gain a more logical and objective perspective.

How can one take advantage of market psychology?

People can make erroneous trades by conducting their own research and determining when market psychology, such as fear 或者 greed, leads to oversold 或者 overbought conditions, respectively. They can then buy when others are overselling and sell when others are overbuying. Additionally, it can be helpful to identify trends early rather than chasing them after they have already gone beyond their basis.

Final thoughts

Although emotions can overcome us all, controlling your emotional reaction to the market is essential if you want to advance in your trading career.

You will have a great potential of controlling your emotions and making better trades if you adhere to the above-described steps.

The importance of trader psychology is often overlooked, with an excessive focus on technical aspects. Even though both are necessary, successful traders are likely to have a different mindset than unsuccessful ones.

But it’s easier to learn the technical side of trading than it is to become a brilliant trader. The latter usually means putting a lot of effort into one’s own personality traits and breaking old behavioural patterns. This is a difficult process that takes commitment and patience. However, the outcomes are probably going to pay off.

免责声明:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked in this communication.