Incorporate Psychology Into Your Price Action Trading Strategies

It is important that you incorporate psychology into your price action trading strategies in order to achieve true trading success.  There is an evolution that most traders follow in their path to become a profitable day trader.  They first believe that there is a holy grail formula to becoming a winning day trader, so they spend most of their time looking for the perfect day trading strategy.  The sad part is that there are hundreds and even thousands of self proclaimed “trading gurus” that are willing to sell you the “holy grail” of trading for a nice fat pay check, when most of these strategies don’t even work in the long run, if they even work at all.

Importance Of Day Trading Psychology

Importance Of Day Trading Psychology

Until you understand that learning to read a price chart is the only way to day trade consistently, you are just wasting your time and efforts.  However, learning to read a price chart is only step one.  You must also learn to control the emotional aspect of day trading which is sure to be even more difficult for most traders than finding a winning trading strategy.  It’s amazing how simple trading really is once you get a true grasp on learning to read a price chart.  On the other hand, it’s also amazing as to how difficult it is to stick to the rules of your winning trading strategy.

It seems that little voice in our heads has only one agenda, and that’s the sabotage our day trading results.  No matter how hard you fight that voice, it will consistently work against you until you learn to control it, and that’s where we are coming from today when we say trading psychology is so important to learning to become a profitable day trader.  Here is what we found in regards to trading psychology at

We are all human beings, this is what makes us all equal. We have emotions which can hinder our control over everything we do in a positive and negative way. Emotions which we all have include, fear, greed, vanity, pride, hope, jealousy, ego and denial. These emotions, if not controlled can impact the way we invest, more importantly the decisions that we make surrounding our investments.

Your aim in the market should be to make as much profit as you can, while minimizing the amount of risk you take. Doing this is sometimes easier said than done. We all value money and invest time and effort into each investment decision. What would happen if your investment started to go in the opposite direction to which you originally intended? How would you begin to feel?

Most undisciplined investors would watch as the value of their investment shrinks before their eyes. It’s never easy to watch hard earned money disappear! Human emotion can cloud the decision making process at this stage and will commonly hinder the performance of many investors. Emotion persuades the trader to hold onto the position in the hope that it will one day come good, after all, you always hear that stocks go up in the long term. The belief will always remain strong that the position will one day become a winner!

This is an example of Loss Aversion. Humans place more value on a loss than on a gain, by this we simply mean, humans suffer almost twice as much pain losing $1 as they would feel in pleasure gaining $1 (Kahneman and Tversky, 1991). This is what motivates most investors to hold on to losing positions in the hope that the price will eventually recover.

This is clouded judgment which contradicts the old saying “Cut your losses and let your profits run”. Preserving capital makes sure you trade another day. Many novice investors do not realize the importance of cutting their losses early rather than letting them get larger and larger. Emotion dictates that if we do not actually sell the position we have not realized the loss! Is this really the case?  

Most traders think that trading psychology will not be a hindrance for them, and I know that I thought the very same thing at one time, but boy was I wrong.  Even when I knew exactly what to do and what not to do, that little voice would come into my head and steer me in the wrong direction, and it happened on almost every trade. 

Until you can learn to control that demon voice, your day trading will forever suffer the consequences of negative human aspects that is innate in all of us.  In order to turn the corner and become a profitable day trader, you must learn to trade like a machine.  Follow your rules with complete confidence knowing that it’s the only way to make it in this tough business.  What really makes this hard is that often you will avoid problems by breaking your rules, and that simply reinforces bad habits and encourages you further to have a change in your game plan. 

It only takes one wrong decision though to wipe out most new traders small accounts.  The positive reinforcement of making wrong decisions builds and makes you think you are invincible, and then you are wiped out by only one or two bad trading decisions.  We know this from experience, so don’t make the same mistakes that we made many times in our trading careers.  Until you make an honest attempt to incorporate psychology into your price action trading strategies, you will forever chase the dream of finding the holy grail in trading, but in the end, your goal of becoming a profitable day trader will forever allude you. 

If you aren’t already trading with price action strategies, we can help you with that portion of the equation today.  Get started by learning to day trade with price action today at  You must also learn as much as you can about yourself and be ready to overcome that tricky little voice that will certainly begin speaking to you during the most inopportune times when your are day trading. 

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