How to Defeat Negative Trading Psychology

Submitted by Marco Palmero on 28 September, 2009 - 12:17

How to Defeat Negative Trading Psychology

I am confident that many traders go through negative thought cycles while trading. Negative thoughts such as the fear of losing money and the thoughts of greed and being a money glutton may haunt you in your trading career. So how do you defeat your negative trading psychology? You have two choices: to face your negative thoughts or to simply ignore it.

The fear of losing money is strong in traders who do not have a trading plan in place, which has an active risk management system to reduce the size of your acceptable losses. So if you have this fear: face it straight in the eyes and define your trading plan instead of simply ignoring it and hoping it would go away.

Humans have a subconscious need to help one another. When we go to work, we all play a function in our society which benefits the community through service. Traders may have this negative thought float through their minds: What contribution does my share trading bring into the world? All I do is sit in front of a computer, press a few buttons, make a profit (or loss) and walk away. First, you can simply ignore this thought, but in boring market trading such thoughts may come back to haunt you. So you must reason to yourself why share trading is beneficial to you and those around you.

So how do you defeat this negative thought cycle? How does your share trading benefit the common man? First of all, you are providing your broker with a job. Secondly, you are providing extra liquidity to the market. Finally, if you are highly profitable and successful in your trading you can donate your time and money to some worthy charitable cause.