• 
  • Psychological state of uncertainty.
• Engulfing / Outside bars
  • This pattern must appear after a preceding trend in the price.
  • An outside bar would have taken out the stops of both the bulls and the bears, with no follow-through. Hence both sides become less confident and this leads to range-trading behavior.
• Hammer bottom
  • After a downtrend, the market opens near to the previous close, drops a lot, before closing the period up towards the level at which it opened.
  • Signals an end of the downtrend where the next period will be characterised by range trading.
• Shooting star
  • After an uptrend, the market opens near the previous close, rallies a lot, but closes the period down towards the level at which it opened.
  • Signals that that supply and demand have become more balanced, and this balance can mean range trading.
• Hanging man
  • After an uptrend, market does not rise much but falls a lot, before closing back up near to the level at which it opened.
  • This is bearish, and represents the last buyers getting into the uptrend.

Orthodox Patterns: Range-Trading Within the Pattern, Trend-Trading After Breakout

• Ascending triangles
  • Generally bullish, range-bound regime within triangle and switches to a trending regime at breakout.
• Descending triangles
  • Generally bearish.
• Symmetrical triangles
  • Psychology is one of complete uncertainty.
• Rectangles
  • Buyers and sellers in fierce competition within the rectangle range
• Flags
  • Scaled down rectangles. Range-trading regime that comes after a strong trending move, and that normally leads to a continuation of the trend.
• Pennants
  • Scaled down symmetrical triangles.
• Broadening patterns
  • Good opportunity to trade the range.
  • Edwards and Magee point out that broadening bottoms do not occur in stocks because the psychology behind the pattern is suited only to tops (i.e. a very excited public getting involved near the top of a trend). The eventual break (to the downside for a broadening top) should provide for quite a strong trending regime.
• Head and shoulders
  • Trend exhaustion and reversal pattern at the end of an uptrend.
  • Period when the H&S pattern is forming, is more often than not a range-trading regime.
• Reverse Head and Shoulders
  • Trend exhaustion and reversal pattern at the end of a downtrend.
• Double tops and bottoms
  • Signals an important trend reversal that will usually be accompanied by a strong trending regime.
• Rising wedge
  • Market is fighting for its life to delay the inevitable decline. It becomes harder and harder for the market to rally but it does continue to make slight new highs.
  • Usually occurs around major turning points and at the end of long trends.
• Falling wedge
  • Opposite of rising wedge. Demanders eventually win out against the powerful but ultimately limited suppliers.

There are a few key things you can do to avoid overconfidence in trading:

1. Know your limits: It is important to know how much you can afford to lose before entering into a trade. Overconfident traders often disregard this rule and end up taking on too much risk, leading to large losses.

2. Do your research: Before making any trades, it is crucial that you do your research and understand the market you are investing in. Overconfident traders tend to take unnecessary risks without fully understanding the market or their investment.

3. Be humble: Be aware of your own limitations and do not let your ego get in the way of making sound decisions. Overconfident traders often think they know more than they actually do and this leads to poor decision-making.

4. Have a plan: A good trading plan should include entry and exit points, as well as risk management strategies. Having a plan will help you stay disciplined and avoid overtrading, which is often the result of overconfidence.

5. Stick to your plan: Once you have a plan in place, it is important to stick to it and not let emotions or greed get in the way of following your plan. Overconfident traders often abandon their plans when things don’t go their way, which usually leads to further losses.

Successful traders have a winning mindset.

You need to be positive and believe in yourself if you want to be a successful trader. You also need to be able to take losses in stride and learn from your mistakes.

Most importantly, you need to be patient and disciplined. It takes time and practice to become a successful trader, so don’t give up if you don’t make money right away. Keep learning and practicing, and eventually you will achieve the success you desire.

Greed and fear are two of the most dangerous emotions in trading. Greed fuels management; when traders feel they’re close to a win or miss what appears to be an opportunity, they can often make irrational decisions in order to secure the win. On the other hand, fear can cause traders to become overly defensive, leading them to exit trades prematurely or refuse to take necessary risks.

To combat these two emotions, it’s important for traders to take a step back and assess their reasoning behind entering a trade before they do so. It’s also a good idea to create an overall plan that includes entry points, stop-losses, and profit targets before entering into any trades. This way, you’re creating specific parameters that will help prevent fear and greed from hijacking your trading decisions.

If you want to be a successful trader, then you must understand the human brain and how it works. Trading psychology plays an integral role in successful trading, as it’s all about understanding what triggers our trading decisions, and how to identify and manage our emotions.

The trick is to become aware of your own thoughts and feelings when trading. Even though trading is all about numbers and calculations, the human element can never be ignored. If you don’t understand yourself and your emotions when it comes to trading, then it will be impossible for you to accurately gage the market.

So take some time to observe your own behavior while trading. Notice what thoughts or feelings drive you to make certain decisions, and learn how to control those impulses that can lead you down the wrong path. With practice, you can train yourself to remain cool and collected while making trades – even when there’s a lot of money at stake!

When you are trading, your ego can take center stage and become the biggest enemy of success. Ego can blind us to reality and cause us to make bad decisions that we think are good. People who let their egos get in the way will often get caught up in trading out of emotion or taking risks that are too large for their account size.

The key is to stay humble yet confident, understanding when it is time to take risks and when it is time to be careful. When confidence turns into overconfidence, you should remain vigilant and know when to back off and save yourself from making a mistake.

Remaining aware of your ego and being able to control your emotions is essential for trading successfully and mastering the psychology of trading will help set you apart from the other 95% of traders who don’t have this skill.

Introduction

Trading psychology is one of the most crucial skills that a trader can possess. It is the ability to control your emotions and make rational decisions while in the midst of a trading session. Mastering your emotions is the key to becoming a successful trader. If you can’t control your emotions, you will not be able to trade profitably. In this article, we will discuss some of the major points that you need to focus on in order to develop a strong trading psychology.

What Is Trading Psychology?

One of the most crucial skills for any trader is trading psychology. Without mastery over this skill, you’re at a disadvantage right from the start. In fact, 95% or more traders are not successful in the long run, and it’s primarily because they don’t have a good grasp of trading psychology.

What is trading psychology, exactly? It’s the ability to stay calm and focused under pressure, to make rational decisions based on logic rather than emotion, and to stick to your plan even when things are going bad. It’s also about knowing your own strengths and weaknesses, and admitting when you’re wrong.

Trading psychology takes practice and a lot of self-awareness. But if you’re able to develop this skill, you’ll be well on your way to becoming a successful trader.

What Are the Benefits of Mastering Trading Psychology?

When you’re able to control your emotions and stay in control of your trading, you’re able to make clear and logical decisions. You’re also less likely to let greed or fear cloud your judgment and lead you to bad decisions.

In addition, a good understanding of trading psychology will help you better understand yourself. This is essential, as it allows you to identify your weaknesses and work on overcoming them. When you understand what makes you react in a certain way, it’s easier to avoid situations that are likely to lead to costly mistakes.

Importance of Monitoring Emotions When Trading

When you enter a trade, your emotions are going to be one of the biggest factors that you have to deal with. If you’re not aware of them and how they’re affecting your decision-making, then you’re setting yourself up for disaster.

That’s why it’s so important to monitor your emotions when you’re trading. Are you feeling overconfident? Or are you feeling so down on yourself that you don’t think you can win? Both of these are going to lead to bad decision-making.

The key is to find a balance. You want to be confident in your abilities, but you also need to be realistic about the risks that are involved. You need to be able to stay level-headed in order to make rational decisions when trading.

Strategies for Keeping Your Emotions in Check

Having mastery over your trading psychology is an undeniably crucial component of trading. To be successful in the market, you must first be able to put your emotions in check and properly manage them. In order to help you do this, here are some strategies that can help keep your emotions in check while trading:

– Set realistic goals: Having unrealistic expectations can lead to disappointment or frustration if they are not met. Make sure that the goals you set are achievable and don’t leave too big of a gap from where you currently stand in the market.

– Take a break: Don’t get caught up in the heat of the moment and allow your emotions to take over by taking a break from the market when needed. Consider setting a limit on how many hours or trades you make within a day so that you can still keep accurate track of your progress without getting overwhelmed with too much information.

– Embrace losses: Not every trade will be profitable but there is important information to be learned from every loss that occurs. Look at each lost trade objectively and determine what strategies could have been employed differently or where mistakes were made so that you can learn from them and apply those lessons going forward.

Tips for Determining When It Is Time to Close a Position

Do you ever feel like you’re holding on too long to a position, waiting for something good to happen? Knowing when it is the right time to close a position is one of the key skills that any trader must possess in order to be successful.

Here are some tips for determining when it’s time to close a position:

– Monitor the markets and understand the opportunities and risks it presents.

– Set stop loss orders at predetermined levels so you don’t get caught off guard.

– Be disciplined about profits and losses. Don’t wait too long to exit if prices start moving against you, and don’t exit too soon if prices move in your favor.

– Take emotion out of your trading decisions, as emotions can cloud your judgment and lead to poor decisions.

– Seek advice from experienced traders, such as mentors or VIPs, who can provide valuable insights into when it may be best to close a position.

Making sure you have mastery over trading psychology is absolutely crucial if you want to make money in trading. Understanding the markets, being disciplined, managing emotions and getting advice will help you determine when it is the right time to close a position and become a more successful trader.

Common Mistakes Traders Make While Trading

Having a mastery over trading psychology is critical to properly manage your emotions while trading. That being said, here are some common mistakes traders make while trading:

– Not having a plan: It’s essential to have a clear strategy or trading plan before starting to trade. Without having one, you may end up taking decisions without proper analysis and plunging into choppy waters without any idea about what might be the outcome.

– Fear of taking losses: A lot of traders have difficulty in cutting their losses and become too attached to the position they take. This leads them to stay too long in losing positions and not taking corrective decisions at the time when it matters the most i.e when there is still a chance of making profits.

– Over-optimism: Over-optimism is another common mistake which can lead traders to enter positions that do not have any analytical and fundamental backing, resulting in loss of capital more often than not.

– Overtrading: Overtrading induces more stress into your trades resulting in poor execution of every trade taken and eventual loss of capital as well as confidence after some period of time.

Conclusion

The reason most traders lose is because they do not have trading psychology mastered. In order to be successful in trading, it is crucial to first have a clear understanding of why you are trading, develop a plan that fits your personality, and then have the discipline to stick to that plan. Trading psychology is not only about having the right mindset; it is also about understanding your own emotions and how they can affect your trading.

Everything in life is a trade-off. Should I buy insurance for my house?

Should I invite my crazy aunt over for dinner?

Everything is an exchange.

This could involve the conventional trade of money but also of time, social credit, and personal utility.

Understanding the trade-offs in your personal day to day life is important.

It also provides a strong mindset to understand trading in the stock market.

Sometimes we rely on hope and willpower while trading.

Yet a stock price doesn’t depend on your determination.

Trade what works. Be mechanical when you are right and wrong and leave the emotions out of trading.