TRADING PSYCHOLOGY
problems with the distinction between opinion and belief. Successful traders know how to make this distinction.
Emotional Attachment
When expectations turn into belief, beliefs result in passion, and obedience in distraction. Our emotions start to be controlled by expectations. Depending on the result of our expectations,
there are two possible outcomes:
• Fulfilled expectation = pleasure
Tere is an area in our brain that is responsible for the sense of pleasure. Tis area is stimulated by different sources, for example sex or certain drugs.
Te positive
trading aſter a losing trade. Tey could have even more adverse effect on us, such as to make us trade more aggressively, to seek revenge from the market, and then make even bigger mistakes. In this case the results will be really painful.
FX
we’ve read, visual images, or even our imagination.
Many of us have built limitative beliefs about ourselves: ie. “I’m a loser in trading and I will never make it, considering I haven’t been able to make it so far and I have only been able to lose money.” Such a belief can have very negative effects on your trading activity.
Inexperienced
emotions that we get from winning a trade also comes from the same area in our brain. Te extent of pleasure that we feel depends on the importance of our expectations. Greater expectations give us more pleasure when they are fulfilled.
• Unfulfilled expectation = pain
Te opposite is also valid for unfulfilled expectations. Tey usually result in frustration, sometimes even pain. Tey are source of negative emotions. Such negative emotions may make us stop
traders often have
problems with the distinction between opinion and belief. Successful traders know how to make this distinction
BELIEFS
Our beliefs are simply the thoughts in which we believe. Each of us has a huge number of beliefs: beliefs related to work, relatives, places where we go, politics, etc. We have beliefs for each aspect of our lives. Beliefs can be strong or weak, therefore we could divide them in three categories: opinion, beliefs and convic38 tions. Tey are all based for example on past events, on what we’ve learned, personal experiences, books
As monetary success is one of the main objectives of trading, we should be particularly careful about our beliefs regarding our financial situation. Te level of money we believe we should have, or we would like to have to be really happy is one of the most important beliefs which can have a strong impact on our trading results. Tis is what we call the “Comfort zone”, and we all have our own comfort zone related to
the amount of money we should have.
It can be very different from one person to another and it is linked to what we believe we could reach as a financial goal. If the level of money we have changes drastically and very rapidly, either below or above our comfort level, our mind will start entering the game to bring us back to our comfort level.
Let me give you an example. Aſter a speech I had given at a finance congress,
FX TRADER MAGAZINE April - June 2019 31
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