“A sharp knife, is useless without a sharp eye.”
Klingon Proverb

So, you’ve read everything there is to read about the online markets, you’ve put in weeks of practice on your demo account, you’ve worked out a solid trading strategy, and now you are finally ready to open your first live trade!

Without a doubt, this is a very exciting moment. You can feel your heart pounding with anticipation, a rush of adrenaline painting your cheeks red as your finger inches toward the button. You open your position, but things don’t go as you planned.

Your excitement turns to cold sweat. You panic as you see the market heading in the opposite direction. There is a voice in your head screaming that you should close the position, cut your losses…

For crying out loud, Please, ignore it!

You can have all the trading knowledge in the world, but if you are not able to control your emotions in the markets, that knowledge might as well be a sharp knife in the hands of a blind man: completely useless.
What good is a solid plan if you do not have the gumption to stick to it? Unfortunately, that is easier said than done when you watch your investment go sideways in real time, but this is where trader psychology comes in.

And don’t worry, we will not bore you with an in-depth analysis of how the human psyche reacts to market-related stimuli; market psychology is simple enough to the point where it all boils down to three very basic pieces of extremely valuable advice:

Number 1: Control your fear!
Number 2: Control your Greed!
Number 3: Don’t give up!

A wise man once said that you must learn to master your fear, before fear becomes your master, a mantra that applies to more than just your trades. But as far as the markets are concerned, learning to control your fear is the most valuable superpower you can employ for a successful trading session (apart from the ability to predict the future, which, if you happen to possess, you can just skip this article entirely.)

If you have a trading plan in place (which you should), stick to it, no matter what. Trust in yourself and your risk management. More often than not, prematurely closing a trading session leads to missing out on potential profits and instead incurring losses that, in turn, damage your confidence in the long run. You have to remember that the markets are omnidirectional. What goes up must come down, and vice versa. Give yourself and your trading strategy a chance before making hasty decisions.

Revenge trading (opening large positions after a loss in hopes of recovering) never worked for anyone. If you end up taking a loss in your trade, learn from it, brush it off, and get back to work, all in that order. After all, if you placed your stop-loss order correctly, your loss should be acceptable.

In the same sense, it is helpful to be able to cut your losses when the time is right, but that decision needs to be based on logic and on your trading plan, not on fear.

But just as fear can lead to missing out on opportunities, Greed can be just as detrimental to your investment. Once again, it all comes down to sticking to the plan. If your trade is going well, that’s great! But that doesn’t mean you should run in and cancel that Take-profit order. Greed can lead to loss, as the market could turn against you on a dime. There is a reason why you are applying risk management to your trades. Take the profit you made and be content. Call it a good day, you’ve earned it.

On that same note, it is important to remember that winning streaks do not happen in trading, and overconfidence could be your undoing.

Don’t get us wrong, it’s good to feel good after a winning trade. You should embrace that feeling. Feel the pride that comes with it; hell, you should probably even pat yourself on the back. But do not let that feeling of euphoria turn into greed.

If thoughts like using your newfound profit to immediately open another position without carrying out proper analysis cross your mind, banish them. 98 out of 100 times, you stand to lose more than you have won.

Finally, our last piece of advice goes hand-in-hand with our first, and that is, do not give up!

Learning to accept loss is a big part of trading. It is an inevitable reality which you should embrace because loss can provide valuable lessons that, in turn, make us better traders.

Go back to the drawing board, in this case, your demo account. Find out what you have been doing wrong and fix it; remember: no one became a successful trader on the first, second, or 10th try.

If you just give up on trading without giving yourself a real chance, it was all for nothing. If you give it your best, and decide that you have no potential, then fine; maybe you weren’t cut out for this.

But never forget: even the tiniest spark can turn into a blazing fire.

By remembering these three simple rules, your odds of being a successful trader will rise exponentially. Remember that learning to trade is an ongoing process, and emotions have no place in this world. So the next time you hear that little voice in your head second-guessing your trading plan, be a stone-cold killer and send it to oblivion.

Because now you know…

Amega

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