Hello Trader,

The Importance of Trading Psychology

Part 3

In our last segment we had just started to talk about the trading plan. The trading plan is a great way for us to start and maintain our trading discipline. With this plan as a roadmap it will be much easier for us to get from point A, which is where we are now, to point B, which is where we want to be.

In your trading plan you may have notes written to yourself about what to expect, basically it is your expectation level that will dictate your satisfaction with your progress. Expecting a consistent return of 1000% per month will have you abandoning your trading very, very quickly.

Have realistic expectations about the returns of your trading system. Know about it’s ups and downs, it’s good days and bad days This will really help you to maintain discipline in the long run.

One of the most difficult things for trader to do is to continue to trade his trading system when it is going through drawdown. A drawdown is a tough period of time for many, many traders. This is especially true of those who are unprepared. It is also true of those unwilling to accept the fact that all trading systems have drawdowns.

If you do not have faith in your trading system then when it does start to go through a drawdown, it will make you nervous. If you had not studied the previous trades and do not have a faith that your trading system will pull out of the drawdown, fear will lead to a lack of discipline. Lack of discipline will eventually lead to not following your trading system. Not following your trading system will eventually lead to loss.

That is the in-a-nutshell, quick overview of trading psychology and why it is so important.

Good Trading and Good Life!

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