Introduction to Trading Psychology

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Psychology is the study of mind and behavior. Hence, when we talk about trading psychology, we focus on most of the feelings and emotions a stock trader encounters while trading.

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Like in most aspects of our lives, understanding how our mind responds to certain stimuli and what it makes us feel can lay the foundation for a controlled mental state – a skill essential to being a successful trader.

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Human beings have complex emotions. For example, even if a stock price is falling, you might decide to hold on to it because you have been a regular consumer of a product offered by the company and believe in it.

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The emotion in play here is ‘admiration’ that does not allow you to look at the data but take additional risks. While we are not saying that emotions are bad, it is important to know when to curb them to avoid major losses.

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Traders who have better control over their feelings and emotions tend to make more logical decisions as compared to those who follow their ‘feelings’.