The Psychology of Day Trading


The psychology of day trading is not an easy subject to tackle, as there are lots of factors involved. That said, if you can get the psychological aspect of trading down, you are going to be much closer to being the profitable day trader you aspire to be.

Make no mistake about it, because although day trading is a numbers game, it’s also very tough mentally. Having the right approach and the right mindset is what the psychology of day trading is all about. Today we are here to discuss the most important aspects of the psychology of day trading, so you can stop losing trades, start winning, and finally put some real money in your pockets!       


Psychology of Day Trading
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The Psychology Of Day Trading – Having The Right Mindset

If you master the psychology of day trading, you can become profitable and successful. There is no doubt about that. The psychology of day trading can be complex, and points often overlap, so it’s up to you to find a good balance between all of them!


Psychology of Day Trading


Accepting Risk as Being Inherent

One of the most important aspects of the psychology of day trading is the ability of the trader to accept risk. The fact of the matter is that day trading can of course be very lucrative, potentially putting thousands of dollars in your pocket per day. Of course, however, there is also a certain degree of risk involved when investing and trading on the market. Even if you take day trading courses and get lots of practice in, there is always an inherent risk of losing money on the market.

This is just the way it is and it’s how the market functions. Whether you are investing in stocks, trading Forex, or venturing into the cryptocurrency market, there is always risk involved. It’s a big aspect of the psychology of day trading, that you accept this risk, that you realize that you will not always make money. Yes, sometimes you may lose money, but this is not something that should deter you from day trading.

With the right mindset, the right knowledge, some practice, and a good attitude, it is more than possible to make a living doing this. Being averse to risk won’t get you anywhere in the world of trading, because if you want to make the big bucks, you need to work with risk, not against it. The fact that there is a certain risk of loss involved in any kind of trading is something you will need to get over if you have any hopes of being successful.

Day Trading Psychology
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Day Trading Psychology: Getting Over Your Fears

Something that is closely related to the above point, in terms of the psychology of day trading, has to do with fear. Yes, it is understandable if you are fearful of placing trades, especially big money trades. As mentioned above, there is risk of loss involved. However, once you have accepted that you may lose some money from time to time, you then have to get over your fear of doing so. Yes, all traders might be worried about losing money, and this is natural, but constantly holding back, only placing the safest of trades, or not trading at all due to fear is not going to get you anywhere.

One big tip we can give here is that you should never trade with more money than you can afford to lose. In other words, if you need that $500 to feed your family for the week, it’s probably best if you use it for that, not for trading. If the money you lose is not essential to your survival, then you don’t have to be nearly as fearful of losing it. That said, of course, it’s not fun when you lose several hundred or thousands of dollars through bad trades.

However, if you are always fearful, you will hold back and not trade when the time is right. Yes, a bit of healthy caution is recommended, as you should never jump head first into trading, especially if you don’t have the right skills or knowledge, but being overly fearful is not going to help either. Sometimes you just have to cross that line and do it. It’s like ripping off a Band-Aid, or a more extreme example, going skydiving. Sure, there may be a risk involved, and yeah it’s scary, but if you do it right, the rewards can be massive.

Don’t Get Greedy – Know When To Take Your Profits

Something which may sound odd, but it is very true in the psychology of day trading, is that you should not hold onto winning positions for far too long. Yeah, of course day trading is all about making money, and lots of it, but this does not mean that greed will win the day. Simply put, if you get greedy, chances are that you are going to end up losing money. For instance, if a position is winning and you have already made a healthy profit, it might be time to close the trade and go home with the money you have generated so far.

Yes, it might look like a good position to hold, but there are various news pieces and analysis tools which are indicating that the price may change direction soon. So, do you risk losing the money you have already generated, or do you keep the position open in the hopes that it will generate even more money?

Now, if you are an experienced trader, very experienced, then you may elect to keep the position open for a short time longer, but this is quite risky. If you are trading Forex and you are already up 25% from your initial investment, and you aren’t sure how much longer the profits will accumulate, it’s best to close the position and bank whatever profits you have made so far.

The bottom line here is that it’s better to make a 25% profit than to get greedy and wait for a 50% profit, only to realize that the price started moving in the other direction. Not only will this decrease your profit potential, but it may actually result in net losses. The psychology of day trading, while on one hand dictates that you should not fear risk, also strikes a balance between risk and greed. Getting greedy and being way too risky won’t get you very far either.

Psychology of Day Trading: Emotions Have No Place In Day Trading

When it comes to the psychology of day trading, one thing which most newbies don’t know is that emotions really have absolutely no place in trading. All too many people will place trades because they may be emotionally attached to a certain asset in one way or another. Some people may simply feel like a certain stock is the next big thing. Maybe you like the CEO of the company you plan on investing in, or maybe you like the president of the USA, so you plan on making a buy trade for USD.

The point here is that feelings will get you nowhere in day trading. Yeah, ok, maybe a 30 year long day trader who is seasoned may be able to put his or her gut feeling to use, but that gut feeling only comes with years and years of experience. As a newbie day trader, your gut feeling is non-existent, and if you do think that you have a gut feeling, ignore it, because feelings have no place in day trading, whether Forex, securities, or otherwise.

Day trading is a cold, calculated, and logical gamble, one where you need to perform plenty of research and analysis on a daily basis in order to win trades. Humans are prone to error, feelings are often influenced by outside factors, often subconscious factors that us humans are not even aware of, and when it comes to trading, this is very dangerous to say the least. The bottom line here is that trades should be placed on merit, on knowledge, and on accurate research and analysis, not on your emotions or gut feelings. Every piece of day trading psychology writing will tell you exactly this.

Psychology of Day Trading
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Day Trading Psychology: Learn, Train, & Plan

In terms of the psychology of day trading, another thing which is essential is that you don’t just jump right into trading at high volumes and with tons of cash. Day trading is not the kind of thing where you want to hit the ground running full speed. It’s something that you need to learn how to do over a period of time. Folks, there is not a single person out there who just woke up one day as a successful Forex trader. It’s just not the way it works. You cannot expect to just download some trading software, invest some cash, place a few trades, and start making big time money right away. This is just not how it works.

Even the most seasoned of day traders out there started out by losing trades, by going through a trial and error process, and by slowly building the right knowledge and skill set to become successful. Therefore, if you have never traded before, whether Forex or otherwise, don’t just run into it head first and expect to be a winner. It’s always recommended to take some kind of day trading course first. Now, sure, there are plenty of great instructional videos on the internet for day trading, lots of great tips.

However, on their own, singular tips or trading strategies, although they might provide you with a few wins, in the long run, they are only small pieces of the puzzle. If you want to be a truly successful day trader, you need to take the time to learn how to do it first, and yes, in most cases, this takes months or even years to accomplish. Simply put, you need to learn, train, pay attention to the pros, take advice wherever you can get it, and then slowly go from there. Moreover, you need to make a plan, because trading without a solid plan never works out well either. Know what your goals are, what your skills are, and make a plan on how to get to the next level.


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Admitting Errors Have Been Made & Correcting Them

The psychology of day trading also dictates that you need to be flexible, and more importantly, you need to be willing to accept your own errors. Now, you may have gone through a full length day trading course, and you might have seen moderate success when trading Forex, securities, or whatever else, however, this does not mean that you are immune to making errors. Yes, we all make errors in day trading. It’s just the way it is. Everybody, even the most seasoned of trading professionals will make a mistake every now and again.

The real trick here is to be able to recognize a mistake when you make it. Yeah, when you lose one or more trades, it’s real easy to blame a news release, or just to blame the market in one way or another. However, the bottom line is that you probably made an error. Sure, the market is random and there are many factors involved, things that are unforeseen. No, it might not always be your fault if you lose a trade, as the market is quite random, but the bottom line is that you need to analyze what happened.

If you are losing trades, more than a couple in a row, chances are that you are doing something wrong. The worst thing you can do in this case is to think that you aren’t doing anything wrong, and then just keep trading the way you have been, and thus keep losing trades. The psychology of day trading dictates that there is no place for ego here. Being the big man with all the muscles won’t get you far here. The ability to reflect inwards, to recognize when an error has been made, and then taking the appropriate steps to remedy the situation is the right course of action.

Folks, never be afraid to admit when mistakes have been made, because mistakes are to be learned from, and if you can tell what your error was, you can then work to fix it, and thus become a much more profitable day trader in the future.

The Psychology of Day Trading: The Market Is Extremely Random

Something which most people won’t tell you, in relation to the psychology of day trading, is that the market is random. Yes, there are indicators, and oscillators, and market news releases, and all kinds of pieces of information you can analyze until the cows come home. Yes, all of these things can give you a good idea of what the market is going to do and what direction prices are going to move in. After all, this is how professional day traders make their money, through cold, calculated, and unemotional analysis.

However, on the other side of the equation, there is randomness, and lots of it. Yes, there are times where no amount of analysis and research will help you place a winning trade. All it takes is a single news release, a single market occurrence, a political event, or even a single trader to throw the market out of balance. Simply put, there are often unforeseen events that take place in the market which can totally shake things up. You may have done all of your homework, and then still lose a trade due to a random occurrence. Yes, this is scary, but it’s just how the market works.

Of course, you still want to perform all manners of fundamental and technical analysis, as it’s always better to be prepared than not, but that said, randomness is just something you will have to deal with here. Moreover, if you suffer a loss due to a random market occurrence or unforeseen fluctuation, don’t just throw in the towel and give up. This kind of thing can happen, but if you plan accordingly, you can then go on and make up for your losses.

Day Trading Psychology

Getting Cocky When You Win A Few Trades

The final point that needs to be made here, in relation to the psychology of day trading, is that this is not the kind of place you can afford to get cocky. Yeah, you might be great day trader, and you might have just won 10 trades in a row, thus banking some great money. However, this does not mean that you are something special or the world’s best trader.

Sure, some of it has to do with your knowledge and preparedness, but it can just as easily have to do with pure dumb luck. The bottom line is that you can never afford to get cocky here. Don’t get cocky, don’t get greedy, and don’t start trading randomly because you think that you are now the invincible superman of day trading.

Never stop doing research, never stop performing analysis, and never let your emotions get in the way. That great feeling of joy and elation from a few winning trades can turn into anger and disappointment real fast. The fact of the matter is that cocky traders get sloppy, they get careless, and they lose their plan when trading. Don’t do this, because when you get careless and overconfident, this is when you will make big mistakes that will cost you dearly.


The Psychology of Day Trading – Final Thoughts

When all is said and done, there are many facets to the psychology of day trading which you need to be aware of. Don’t fear loss, don’t fear risk, and realize that the market is random. At the same time, don’t get cocky, greedy, or careless, and never abandon your plan, your common sense, or let emotions get in the way.

If you master the psychology of day trading, you are one step closer to becoming a profitable and successful trader. Now, if you really want to become a pro, as mentioned above, it really does help to have a good knowledge base, something which a course like the Income Mentor Day Trading Academy can help you build from scratch.


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