Fear is a major emotion in trading. The fear of losing money and being wrong. This typically is caused by someone trading with money they simply can not afford to lose. This psychological barrier can take hold of a trader and cause him or her to close out positions too early, without good reason to do so. If you want to make a lot of money, you must let your profits run. Following up with a stop loss to protect your profits as they grow is a sound trading principle.
Another major emotion in trading is greed. Greed has caused many traders to lose most or all of the money in their accounts. It can mean taking too many positions, for your account size, at one time. The trader who gets swallowed up with greed wants to get rich quick, which causes him or her to over-trade, and not follow sound money management. The key to overcoming greed is discipline, and the ability to follow a solid trading plan.
Trading psychology is certainly a major key to success in the markets. Many traders do not understand the impact. They believe all they need is a good trading method. A good trading method makes a difference. It would be wise to never underestimate the importance of trading psychology. If you can eliminate emotions, use a proven trading plan, and implement strict money management, you could make a fortune trading the markets.
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