How Important Is Day Trading Psychology

If you are a student of the markets, or if you have traded to any large degree, then you are probably very familiar with the term “Trading Psychology.” The question I hear most often is one that asks how important is day trading psychology when it comes to making it as a professional trader.

As a futures trader, I can say without a doubt that in my own trading, my frame of mind is one of the most important, if not “the” most important part of profitable trading. There are many different trading strategies and trading systems that can and will make money when trading the markets. However, you can give that same winning plan to two different traders, and one will make a fortune with it, while the other trader will lose a fortune using it.

I account for these differing outcomes due to the mentality differences between the two traders. The winning trader is most often confident, relaxed and trading with a clear mind and without any bias as to where the market is headed. On the other hand, the losing trader is down on himself, unsure of his actions, and he or she usually has a very strong bias on which way the market may be headed.

It is important that a trader not bring personal problems and distractions to their trading screen, as these issues can easily bleed over into their trading results. One thing that I always recommend to a trader on a losing streak is to never attempt to average down, because usually they will make a bad decision and turn a small loss into a very significant loss. My recommendation to a trader that is on a losing streak is to get up and walk away from the screen and regroup. Walk around the block, or down the street. Go down to the coffee shop and get a cup of coffee and clear your mind, or better yet, call it a day early. It’s better to end the day with a loss than to end it with a bigger loss because you were trading with the wrong frame of mind.

Some other things that I recommend are to make sure that you get a good nights rest, and to start your day with something positive so that you carry a positive frame of mind over into your trading. There are many good books that will go into a lot more details on the importance of a winning frame of mind, so make sure you read one or more of them. Now that you understand the answer to how important is day trading psychology, make sure you work on this most important area of your day trading. It is the key to being a winning trader!