You may have heard previously that forex trading is 90% psychology, with the remaining 10% being the strategy itself.
It raises the question of what makes psychology so important in trading? And further to this.. why is it often ignored?
Why is Trading Psychology So Important?
Trading psychology comprises of several different factors such as mindset, self-image, composure and emotion.
The mental state of a trader ultimately determines how succesful they become as in order to execute a strategy flawlessly you must be able to remain neutral under pressure.
As a result of this, many retail traders fail because even though they may have a powerful strategy, they are unable to execute it as required.
Another reason why psychology is so important is that traders are always seeking entertainment from the market versus looking at the market for what it is.
As humans it’s in our nature to seek excitement and let greed creep in, making the act of being neutral very counter-intuitive.
In Rewired, the state of emotion that we seek to achieve as traders is referred to as The Flow Zone™ and is a key part of the Rewired curriculum and teachings.
Mindset is one of the most important factors in trading psychology that contribute towards whether a trader becomes successful or not.
A trader with a positive, growth-oriented mindset is more likely to succeed in the long run because they are open to question themselves and remain teachable. Whereas a trader with a negative mindset is much more likely to give up or question their strategy.
It’s therefore crucial for you as a trader to have a growth mindset by focusing on continuous learning, self-reflection, and goal-setting.
Self-image also plays a huge role in a trader’s success and focuses solely on how you perceive yourself as a trader.
Working hard to create a positive self-image will result in an increase in confidence in your own ability, which then reflects in your performance.
A trader with negative self-image usually doubts their own abilities, and even credits external factors as the problem such as strategy.
This is an area of psychology that is covered in depth in the Rewired curriculum and will help you to increase your overall success in the markets.
Composure is the ability to remain completely calm and neutral when looking at the charts and executing trades.
The human brain naturally feels under pressure when looking at live market conditions, and an inexperienced trader can easily feel like they need to enter a trade often and in quick succession or else the trade will go without them.
A composed trader is able to make clear-headed decisions based on their analysis and strategy, without being influenced by emotions such as fear, greed, or panic.
Remaining composed is what will ultimately see you succeed in the long-term.
Emotions such as fear, greed, and hope can interfere with a trader’s ability to follow their strategy flawlessly.
Fear can cause a trader to hesitate or manage a trade incorrectly, whereas greed can lead to overconfidence and taking unnecessary risks.
Hope is what causes a trader to enter a position at the incorrect time, or even hold on to a losing position for too long thinking it will move back in their favour.
Successful trader’s learn to control their emotions to a certain extent, and be able to identify when emotion is becoming an obstacle between them and their trading plan.
As a Rewired student you will learn this in detail, specifically in module one (fear of missing out) and module two (dealing with anxiety in trading).
Why Psychology Is Often Ignored
Many educators focus on teaching students topics relating to strategy and risk management. Although still important, there is usually little to no emphasis on trading psychology even though it makes up for 90%.
The result is that there are many retail traders out there who know their strategy down to every detail, but are unable to generate consistent returns over a long period or feel like they are missing something that they just can’t put their finger on.
This creates a common mis-conception in forex trading which is that traders believe that to be succesful you only need to follow a profitable strategy in order to generate consistent returns.
In reality, traders believe they are close to learning 100% of what they need to when in fact they’ve only focused on the 10%. The 90% being psychology.
Rewired was conceived out of the desire to help traders from around the world really take hold of their future, and to be the missing piece of the puzzle of which many educators have failed to address.
Fun fact: A large majority of funded traders within the Falcon FX community who have taken the Rewired program directly credit it towards passing their funding assessments and rapidly scaling up their account.
Coincidence? We think not.
Rewired Versus Trading Psychology Books
Rewired provides an extensive curriculum of intentioanlly designed audio and video modules, covering topics such as Dealing With Anxiety in Trading, The Rewired Formula, Limiting Beliefs and more.
Additionally, you’ll have access to the Rewired Study Guide PDF, important Notion resources, live webinars with special guests and on going support through a fast-growing community of like-minded traders.
As a Rewired student you are well equipped to tackle the psychological hurdles that are between you and your success as a trader.
Join Rewired by clicking the button below and if you have any questions let us know!