Trading Psychology – 3 Important Points to Understand the Trading Psychology


Since ancient times, trading has existed in one form or another. In its most basic definition, trading is the exchange of goods and services between two entities. From the earliest form of barter to the introduction of fiat currency and cryptocurrency, the ways of trading have matured along the passage of time. The evolution in the means of trade also triggered a long chain of financial developments like credit facilities, banking institutions etc. 


One of the most notable among them, stock trading. Over the history of trading, the world has seen countless examples of successful and failed traders. Researchers have run rampant and are still doing it, trying to formulate that one golden formula for the successful trader. Countless theories and possible ways were thrown in the cycle of being born, tested and ruled out in this still going-on hunt for the golden formula. 

Surprisingly, the most common reason that failed traders mention as the primary cause of failure in trading is being unaware of their habits that creep their way unconsciously. Take laziness as an example. One of the most common and highly detrimental factors in one’s professional life but extra disastrous in the case of a trader. Below are some (of the many) crossroads a trader faces in their life.

What is the mindset to become a successful trader?

Successful traders are always thinking; mindful and confident of their actions, and; never getting desperate.

Trading has always been about pouncing on the opportunities and seizing the moment. But every successful trader knows that opportunities would appear once again; can even be created and not something to lose their mind over. Being desperate over an opportunity may blind someone to the potential losses. Which may, in turn, end up destroying their trading career. Common trading psychology tips tell you to prioritize your performance rather than profit since that consistency is better than that unpredictable profit.

How do successful traders work?

Successful traders are not reckless and reckless traders are not successful.

The most frequent goal of successful traders is risk elimination. Thus, most of the successful traders convey that you need to keep reading, understanding and not remain in the dark about the trading concepts like overtrading, trading edge etc. that other traders use. 

Technical analysis explained by most traders usually contain elements affected, directly or indirectly, by the various trading techniques whether or not they personally use it. Other than that, good traders know that money makes money, if not today then tomorrow. Thus, making their primary goal as capital preservation rather than profits.

Am I overtrading?

Yes! Maybe. This should first and foremost be the psychology of trading whenever you enter the field. If you ever stumble upon the thought of overtrading, the principle of prudence teaches us to take a deep breath and account for it. It’s better to waste some time thinking over it rather than continuing trading mindlessly that may or may not end with a disastrous loss.

Getting broiled up in emotions and trading in all market hours may mean that you are actually overtrading. Remember to check back if you are calculating risk per trade accurately or not. Overtrading usually leads to losses due to additional brokerage and taxes because of multiple instances, increased risk of miscalculation and a plethora of other factors.

What is a trading edge?

Research this topic extensively if this is a foreign term to you. For basics, a trading edge is defined as a certain approach or technique that enables a trader to have an advantage over others in the market. Getting a deeper understanding of this topic and deciding if you need it or not can mean the difference between moon and stars for a trader. This debatable topic can help a trader understand the psychology of trading happening around them.

In truth, there are a vast number of papers and research on the topic. Almost every successful trader has his/her own view on this topic. Some believe it intensely while resting laughing at it. Thus, research, understand the market and research some more before getting comfortable with any technique.

Am I addicted to trading?

With the flow of colossal amounts of money, pumping adrenaline and the chance of huge profits, trading does become addictive to many. The fundamental and most common way to identify an addiction is to understand if you are doing an action without planning or based on emotions. The release of dopamine during the profit phase of trading, the chief cause of this addiction.

The reason for the losses of many traders. The psychology of trading charts always points to this fact. Many traders destroy themselves in the spur of the moment due to the easy process of trading. The golden rule of trading, prudence, tells us to always be mindful. Chasing profits can blind anyone. And blindness, even a temporary one, increases the chances of a fall many folds.

How Chart Analysis helps you?

As the most instinctual way of humans, is replicating the success stories of successful traders. And the most fundamental thing for reproducing such a story is, undoubtedly, replicating the psychology of traders. Understand their mindset, beliefs and thought process to gain a better edge in the process of trading.

Mr. Umesh Sharma at Chart Analysis, helping the upcoming and continuing trader to develop their skills by getting the requisite knowledge of trading. This platform opens up the options of learning the technical forms of trading in an easy and understandable manner. You can access our affordable online technical analysis and option strategy courses to get tremendous knowledge about trading, based on live theories and examples.


Trading is a continually morphing process, changing every moment with a dazzling number of factors affecting it. One can never learn enough about trading. Thus, a successful trader strives to keep learning more about the changes and not be in ignorance. Restraining impulsive habits and maintaining consistency has always been the best way to move forward in a profession. And trading is the same.

Due to the amount of money flowing, letting emotions get you and a spur of the moment can be most devastating in the life of a trader compared to other professions. Being a successful trader is a long and tough path but treating trading like a gamble is an easy way to self-destruct. Thus, understanding the minute difference between gambling and trading is a very integral aspect for a trader.

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