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Mastering Trading Psychology

ByDave Stopher

Nov 7, 2021

Trading has a lot to do with psychology, and many traders are unaware of that. Many things can affect your trading, especially your characteristics and emotions that could cause havoc in your trading patterns. But, the only way to avoid that from happening is by mastering trading psychology.  

Trading psychology involves the mental and emotional states of a trader and how all of this affects their trades. The trick is to train your mind and master the trading psychology to trade the right way. It can seem a bit tricky and confusing right now, but with some help, you can master this skill. Continue reading further below and learn how to master trading psychology. 

7 Ways to Master Trading Psychology

1. Consider Your First Losses as a Learning Fee 

It is normal to panic when using your own hard earn money, and when this happens, you may exit a particular position too early just when your holding starts to drop. This may also lead to holding on to a position for too long, ignoring every possible red flag. Hence, when you incur your first loss, always consider it a learning fee going into your trading education. Making the same mistakes or losses will help you learn and get better at trading in the long run.  

2. Practice or Start with a Paper Trading Account 

If you don’t want to start with fresh cash at once, you can instead set up a paper trading account by practicing trading without any panic or emotions coming in the way.  Doing this will help you build confidence that will come in handy with your existing account. Paper trading accounts also help traders learn trading software and the process of executing trades. This is a good way for you to stop losses in the future. This trading account is perfect for beginners and when you want to try out a new strategy. With a few weeks of practice, you will surely be able to master the psychology of trading.  

3. Learn From Other Successful Traders  

Whether you are trading with a broker or on your own, it is good to observe and learn from different successful traders, as these ones usually spend most of their time learning the basics and keep working towards building their knowledge through research. Such traders are known for setting goals and working through the process. There is no doubt that they do mess up at times, but they see it as a way of getting better. Instead of being a proactive trader, you have to be a reactive one. Make sure to research the top traders. 

4. Set Stop Losses 

Instead of investing all your emotional energy in a specific stock, set stop losses.  This will allow you to accept the fluctuating nature of the market. You can’t accept the market to flow according to your will, and maybe sometimes, if you’re in luck, it will. But it’s best not to keep such a goal. All you need is to find the balance, and you gradually will with the right amount of patience.  

5. Stick to One Favourite Pattern  

There are many chart patterns, and every trader has at least one favourite one. Looking for the correct pattern has a lot to do with your trading psychology. Once you’ve found that works with you the best, select at least 5 of your favourite and practice recognizing each pattern whenever they return. It’s not easy recognizing them, and itself is a skill, but practice makes perfect! 

6. Learn Reading News Catalysts Properly 

You have to take news catalyst into account even if you have the best technical analysis, as without one you will go broke. Instead of reacting to the news you hear, check out different stocks by using a stock screen then look for the news that describes or has an explanation for that particular stock’s performance.  

7. Locate the Best Stocks to Trade with a Stock Screener  

It is not easy to select the best stocks out there, so to find the right one, you should have a watch list. Creating a watch list will help you choose those stocks that fit with your need.  Stock screeners will help you filter all the thousands of victims and focus on the one that meets your needs. It is good to start with these, and this way you will maintain your trading psychology.  


Hopefully, with the help of these ways mentioned below, you can now get into mastering your trading psychology and successfully be a part of the world of trading.