Psychology is a hugely important part of forex trading. Traders with a subpar strategy but great trading psychology will typically outperform traders with a great strategy and subpar psychology. Psychology is often talked about as being crucial in trading but it’s rare to find any examples or more information given. Therefore, this is something most new traders are completely neglecting, which leads to unprofitable trading for the most part.

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In this article, we are going to discuss the benefits of improving your trading psychology, how to do this and everything you need to know to get you passing prop firm challenges! So, let’s get into it…

Hacking Your Psychology in Prop Firm Trading

Trading is emotional, there is no way around that. When you’re on a winning streak, you will feel excitement, greed and fear. When you’re on a losing streak, you’ll feel nerves, fear and disappointment.

These emotions will drastically influence your results in the market, as humans are typically driven by emotion. You will never be able to completely remove these emotions from your trading. However, you can certainly remove the impact they have on your results by working on your psychology and putting systems in place to mitigate the risks they pose.

The Importance of Psychology in Your Trading

Have you ever encountered the situation whereby a trading system is completely profitable in an objective back test, but you’re losing money in the live markets? This is a very common problem faced by traders. The reason for this problem is simple… Psychology.

 If a system appears to be profitable, but you cannot make it profitable in the live markets, you’re the problem. Now, this is either down to the fact you cannot operate the system (E.G you’re missing trades and have hindsight bias), or more likely, you’re struggling with fear and greed when you’re trading. You may even be very aware of this, but still find it difficult to get out of the rut. We’ve seen this with many of our Elite Funded Traders over the last few years.

Trading psychology might not be glamorous, but it’s crucial to focus on as much as your trading plan. If you’re struggling with fear and greed on a £100 account, imagine the emotions you’ll be facing when you’re trading one of our £2,000,000 funding trading accounts…

What Happens if Your Psychology is Not On Point

Many traders jump from strategy to strategy, consistently losing money, and claim that the strategy is the reason for their losing streaks. The reality is, you can go on Google and find yourself a genuinely profitable strategy in the next 10 minutes. There are plenty of simple and effective trading strategies online that will generate a consistent return over the long term. These returns won’t be groundbreaking, but there will be a positive return. It’s worth mentioning that back tests and forward tests should be conducted – don’t blindly trust strategy reports you read. Ultimately, there is a situation whereby the trader isn’t profitable due to their strategy – of course. However, a large percentage of the time, the trader could be profitable or at least achieve much better results if their psychology was dialed in.

You will never really see a profitable trader that has bad trading psychology. However, you will frequently see unprofitable traders with good trading strategies. Largely speaking, if your psychology is not dialed in, you will struggle to be profitable over the long term.

How To Hack Your Trading Psychology

Trading psychology cannot be fixed overnight, but it can be hacked relatively easily. This is done by processes… You cannot turn off your emotions when trading, but you can put simple processes in place to ensure these emotions are not detrimental to your results.

Follow these steps:

Conduct a back test of your trading strategy and compile many years of data. This will give you confidence in your trading plan and remove the unknown and fear you feel when entering trades.

Create a trading journal. This must be filled in before and after every single trade. This will improve your ability to trade, give you confidence and help to remove fear in trades.

Create a trading checklist. Before every trade, you must fill in this checklist to confirm your trading setup is valid. This helps to remove greed and reduce fear.

Create an in-depth trading strategy and risk management strategy. This means you must risk a certain amount of capital per trade, and you cannot make the decision yourself on a trade by trade basis. This also removes fear and greed on winning streaks.

Download a free lot size calculator to ensure your risk management stays in line with your strategy.

Review and reflect at the end of every trading session, focusing on psychology as well as trades.

If you create a daily plan/SOP that you must follow each day which includes the tips mentioned above, you’ll notice that you’re forced into behaving like a professional trader. You will still be emotional and may still make mistakes, but these processes should greatly reduce the effect your psychology has on your trading performance. We recommend this to all of our prop firm funded traders.

Tools To Help With Managing Psychology In Forex Trading

There are several tools you can leverage to greatly improve your psychology in trading…

Trading Journal

Results Spreadsheet

Gather Many Years Of Back Test Data

Trading Plan

Risk Management Strategy

Lot Size Calculator

ASR (Advanced Self Reflection) Of Your Performance & Emotions

These tools can either be created yourself or found online. By using a combination of these tools properly as a part of your daily trading routine, you should start to see you’re much more in tune with your psychology. Additionally, you will understand how to operate with a much higher standard of trading.

Our prop firm funded traders also have a risk desk and a personal mentor to help them along their trading journey.

In Summary – How Do You Improve Your Psychology In Trading?

In conclusion, you can improve your trading psychology overnight by putting processes in place to remove the effect emotions have on your trading results. You will still have fear and greed, but these will be well managed and the risks mitigated. Use the tips and tricks we have mentioned in this guide, and we hope that your psychology will improve! We’re sure your trading results will also improve as a byproduct.

About Company :- We are a leading proprietary trading firm based in London (UK), specializing in supporting experienced prop traders.

Our commitment is to help traders excel and provide the tools and capital they need to compete in a marketplace defined by change and disruption.

We are focused on seeking out trading and investment opportunities to grow our capital in the global financial markets.

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