Certain schools and trading training centers only insist that their students study the “core” subjects: financial mathematics, computer sciences, etc… all of this to the detriment of human sciences, such as psychology. At the Californian Institute of Trading, we push our students to progress in all of these disciplines. Trading psychology plays an important role in the market, because it is our emotions that dictate our decisions and make us into good or bad traders.
To be a “good” trader, it is not simply a question of “sensing” the market, but one also needs to know how increase gains and cut losses. On the surface, that may seem quite easy, but controlling emotions is often much more difficult that we are led to believe. All of those who participate in the market are at the mercy of their emotions, especially the ones that control decision-making: fear and greed. Each individual has completely unique behavioral patterns, but no one person can simply let go of their emotions entirely. The desire to shine in front of one’s colleagues, pride or shame can drive individuals to hide their negative results without ever reevaluating their actions. But with the proper education, traders can learn to control their emotions and to establish a strategy based entirely on facts, and not on personal qualities.