As a trader or investor, of course, they will have knowledge of various types of analysis such as technical analysis, fundamentals, and even other knowledge. In addition, as an investor or trader, you must also have provisions about trading psychology. This time we will discuss what trading psychology is.
 
Trading psychology is a decision in making transactions that is influenced by mentality, mind, and behavior. Psychology that will affect a person's way of thinking at the time of decision-making. For more details about this trading psychology, you can read the article below.

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What is Trading Psychology

A trader's knowledge will not only stop at analysis, but must be equipped with mental readiness. Therefore, there is a term called trading psychology. This trading psychology will later affect a person's way of thinking which is then carried out with behavior in making decisions.

If you are not prepared to have a chaotic mindset, then the transaction may be a decision taken inappropriately. In fact, you may experience losses.
 
And vice versa, with a positive and calm mindset, then you will get the right decision and can even bring profits. The psychological aspect of trading is an emotional component of an investor's decision-making process that can help explain why some decisions seem more rational than others.

It can be said that trading psychology is also an emotion that arises in a trader when carrying out trading activities as a reaction to their trading results that are either losing or lucky.

Functions of Trading Psychology

For a trader who applies this trading psychology, he will certainly feel some advantages from the trading psychology itself. For a trader who doesn't know the function of trading psychology, you can see those points below.
  1. To produce optimal results in making a trading transaction.
  2. To learn self-control and discipline in making yourself a competent trader.
  3. You can also have clear capital management. With stable trading emotions, it will later affect your capital management. Emotions that are in a hurry will make your money management messy because usually without thinking twice, they will immediately use the capital they have.

How to Train Stock Trading Psychology

For those of you who trade stocks, there are ways you can do to train your trading psychology. You can follow the steps below to be able to practice emotional control of your trading transactions. These steps are:

Creating Realistic Targets

The first thing you have to do is to create realistic targets. From the beginning you have to make the right decision. So that the act of making realistic targets will bring benefits to you. You can set a profit target that you want to get.
 
Of course, it must be armed with the market analysis that has been made. At this stage, you also need to be clever in placing bid positions, to setting positions to close. If you have reached the target, then you must have enough to trade.

Managing Risk Management

The second is to regulate risk management. You will not always get an advantage every time you open a position. You may also open some positions by following the chart. At this stage, you need to manage the risk of losing so that the capital does not run out at that moment.

In a calm state

And the most important thing is that you have to create a calm atmosphere. Trading psychology is something that requires calm without involving any emotions. Therefore, when making trading transactions, get used to being calm. You can do this by trading in a disciplined manner. Then, try to trade reasonably and not make decisions based solely on excitement or emotion.

Also read : 

Getting to Know the 14 Levels of Psychology in Forex Trading

How to Practice Forex Trading Psychology

While those of you who want to trade forex, there is also a way that can be done to train your forex trading psychology. You can follow the steps below.

Creating a Trading Plan

Traders must always be consistent with the strategy or plan that they have created. You can start by planning a good trading strategy and using the right analysis. Furthermore, you can execute the plan confidently and without hesitation by remaining disciplined in the plan you have made. Because it could be that if you don't run the plan occasionally, the chance of loss or getting losses will increase.

Implementing 3M

Mind, Method, Money or commonly called 3M will have a great influence on your trading psychology. You can understand this 3M through the following explanation.

Mind

The mind will be quite closely related to psychological factors, where later you will apply a trading plan and risk management. Where traders must be able to control their psychology to carry out strategies according to the plan that has been made. Whether the trader will dare to hold an open position at the time of profit or not. Also dare to apply a stop loss when the position is not in accordance with the plan.

Method

While the method will be related to the trading method or system that will be used. You can use trading methods that have been tested for accuracy to analyze the market. This method must be carried out with a stable psychological condition. So, later you will not make the wrong decision on the trade that will be made.

Money

The last is money management which is also needed apart from good emotional control. You must be able to manage your existing capital and adjust it to the trading plan you have made.
 
Don't use all the capital you have when you first trade. There are several reasons why most traders don't care about the money factor as well as the mind, namely:
  1. Because psychological factors are not easy to measure. Learning technical analysis or fundamental analysis and applying it is easier, because analysis in general can be calculated. Analysis can be applied using advanced computer software, but not to trading psychology.
  2. Because the psychological factor is not properly understood by most traders. There are not many books that discuss the psychology of trading, even in English. Most traders think that they already understand themselves, what are their weaknesses as a human being that affect the quality of trading.

Don't Be Greedy

Traders who have a weak trading psychology, will usually be easily attracted to play with large and undirected capital.

As explained earlier, because of the emotions after the profits are over, then the next step that traders take is to suddenly invest a very large amount of capital in the hope of getting profits back. This will certainly be detrimental to traders, because the risk of loss or loss is very large.

How to Master Trading Psychology

There are also ways that you can apply to master this trading psychology. You can apply these methods to your trading process in the future.
  1. Often takes a break. Subconscious emotions often control our actions. So this pause will help us to deal with the situation wisely. You should use this tactic in trading. When emotions start to appear, you can take some time to be quiet and think about what happened before you start to act.
  2. Make a plan. This is the same as creating a trading plan. Creating a trading plan will help us carry out the plan that has been set at the beginning consistently. The trading system applied must also be based on your own trading style, psychology, and bias.
  3. Adapt to change. While it's important to have a trading plan, you still have to adjust everything related to existing changes. This will help you to reduce emotional involvement so that you can assess each situation yourself and ensure that you are trading logically and reasonably.

Advantages of Practicing Trading Psychology

This trading psychology needs to be prioritized over other concepts. This psychology is related to your mindset so that later it will bring benefits to have the ability to control yourself.
 
People who are able to control themselves and their emotions, will later know when to continue their trading, such as by targeting your profits or profits.
 
Similarly, if any bid is not as desired, traders can refrain from stopping trading first. Another advantage is that you can get the optimal amount of profit with a maximum trading psychology as well.
 
Because you have been able to control your emotions as explained above. In addition, you have also become someone who is competent in trading because you have been disciplined in managing the capital you have.

Mindset to Get Rid of in Trading Psychology

There are several negative mindsets that you must get rid of when you want to learn trading psychology. The mindset is:
  1. Feeling lacking in knowledge. Usually, people who have a negative mindset will blame themselves for their lack of knowledge and information for their defeat. They tend to feel that they don't know effective trading steps. They will suspect that successful traders must have knowledge that they have kept secret. Or worse, they will resign themselves to their transactions without any effort and find out what are their mistakes in trading.
  2. Autopilot mindset. Most people think that autopilot can bring success. In reality, some traders try to develop their automated trading systems and others buy from experts. This is due to their laziness, greed, and poor financial literacy. Not a few traders spend money to buy a system that converts a set of code into a flow of money.

Psychological Levels of Stock Trading

In the world of stocks, there are 3 levels of trading psychology that you must understand. The levels are divided into beginners, intermediates, and expert traders. For the explanation, you can understand through the article below.
  1. The psychological level of a beginner trader. Beginners usually have a short trading experience, which is between 0-2 years. At the beginner level, the psychological tendencies experienced by a trader are usually more often unsettled when seeing stock prices fall, traders will be more likely to get excessive euphoria if they get a lot of profit, traders are easily panicked when they see JCI falling, traders are easily influenced by fried stocks, traders can be easily influenced by issues or invitations to buy stocks,  Traders are sometimes afraid of falling behind when they see stocks have risen, still easily rash in making trading decisions.
  2. The psychological level of intermediate traders. Intermediate level traders generally have more than 2 years of trading experience. The psychological tendencies of intermediate traders are generally such as, being calmer in facing the market even though sometimes still a little panicked, sometimes still influenced by rumors and issues and invitations to buy stocks, starting to have their own trading stance, having started to create and run a trading system, starting to be able to analyze stocks independently, having begun to have careful considerations before buying stocks, and better diversification of stocks.
  3. The psychological level of an expert trader. Expert level traders usually have more than 5 years of trading experience. The psychological characteristics of expert traders are that even though the stock price falls, expert traders will remain calm and not easily panic, not easily influenced by a sense of euphoria when they can make big profits, already have a clear trading plan, are able to choose and analyze and make trading decisions, make trading decisions purely based on personal analysis, are not affected by issues or invitations or even fried stocks,  able to distinguish between stocks that are worth buying and those that are not.

Books on Trading Psychology

For those of you who like to find information about something through the media of books, then you can read the following book about trading psychology.
  1. The Psychology of Trading: Tools and Techniques for Minding the Markets by Brett N. Steenbarger. This book will explain psychology and also investing. In addition to providing modern knowledge of psychology, this book provides a reflection on the mind and breadth of knowledge of one of the leading practitioners regarding trading.
  2. Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas. This book will uncover the underlying reasons for the lack of consistency and help traders to overcome the ingrained mental habits of spending their money. He takes market myths and exposes them one by one, teaching traders to look beyond them at random by understanding the reality of the actual risk.
  3. High Performance Trading: 35 Practical Strategies and Techniques to Enhance Your Trading Psychology and Performance by Steve Ward. This book will teach proven practical techniques and strategies to help traders of all abilities, experience levels, and styles to improve their trading performance and psychology.
After knowing what trading psychology is, its functions, how to deal with it, and other things, you can apply it to your trading daily life to create a stable emotional state when making a transaction.

This the discussion from GICTrade regarding the explanation of "Trading Psychology, How to Train and Master the Trading Market". You can also find out other information about trading, crypto, and other financials, such as "Bitcoin: Definition, How It Works, and Its Benefits" only in the GIC Journal. Also make sure you deepen your forex knowledge at GICTrade, via the scalping ebook, and also NFP live trading.