Understanding Trading Psychology for New Traders
Trading is akin to an emotional roller-coaster, especially for new traders. When a trader has a profitable trade, he feels like he is king of the universe. When he suffers a loss, it is quite the opposite. He feels as if he is the world’s biggest loser. What’s worse, is each emotion causes havoc in the trader’s account.
When the trader feels like the king of the universe, then he is more apt to take trades that do not fulfill the requirements of his trading plan. In other words, he throws caution to the wind and takes all trades regardless of his plan.
When the trader loses, he becomes scared, unable to take the next trade, even though it meets all the criteria. By the time he is able to enter the trade, late into the trend, he loses, which only re-enforces his feelings of being a loser.
These two emotional extremes are what makes trading psychology a double-edged sword. The trader must be conscious of each and every thought because they can have huge impacts on his trading. The new trader has to learn to how to balance on the emotional roller-coaster that trading provokes.
While many books and courses are available regarding trading psychology, actual understanding trading psychology for new traders will not occur until they go live. Trading binary options allow new traders to venture into trading using a limited risk environment, instead of using leverage accounts like forex and futures. By utilizing the limited risk environment, new traders can “test the waters” in what they will experience when trading a live market, while maintaining control over how much they will potentially lose, as well.