Trading Psychology Management

What trader has not heard the phrase trading psychology? What trader has not viewed, or been told that their trading problems are the result of trading psychology?


What trader does not need trading psychology management, if they are to become a profitable trader?


What an interesting combination of words: trading + psychology. When considered separately by definition, and especially by a 'non-trader', these words would appear to have nothing to do with each other. Trading is the buying and selling of an underlying contract through the execution and management of a trading method; psychology is the study of the brain and behavior, which is done in an attempt to help people understand why they feel and think the way they do, and/or help them make changes to their resulting behavior from these feelings and thoughts.


This list includes typically discussed trading psychology issues, but what do any of these have to do with trading by definition?


  • You don't take a trade means you have a fear of losing.
  • You over trade means that you have a fear of missing something.
  • You don't take a stop means that you won't take responsibility.
  • You hesitate taking a trade means you have a fear of being wrong.
  • You trade with money that you can't afford to lose - TILT.


The list comprises psychology issues, which then lead to an emotional response which occurs during trading; these issues do not have anything to do with trading method. These are fears and emotions, which would become a problem to the individual any time that they were 'tested' in a performance related activity.


Trading psychology management will involve the realization that any of the emotional problems that you have previously encountered in other stress related circumstances, will absolutely be an issue when trading, but that this is related to the 'emotional baggage' that you bring into trading, this is not isolated to trading.


Traders spend so much time searching for that perfect trading system, but they do so little to prepare mentally for trading - WHY is that the case? Two primary reasons for this would be awareness and avoidance.


Trading Psychology Management Awareness


Many people coming into trading have been very successful in past endeavors. If these experiences didn't involve dealing with stress in a way that the resulting emotions had to be controlled in order to succeed, they now have no reason to know that ultimately trading psychology management will be the determinant in their ability to now be a success at trading. This was my experience when I came into trading, a high performing scholar-athlete through school, and then successful at starting and running two profitable businesses; I just assumed that I would learn how to trade and be very good at it.


It is interesting just how unaware of the realities of emotional impact I actually was. I had only gotten involved in trading because I sold my businesses after my wife's mother and my father had passed away in a four month period, and I felt the 'need' to 'get away' and do something different. Coupled with these personal emotions was the 'influence' I was receiving from the person that I was learning from - paper trading was for 'pussies', just take your trades and manage them.


Absolutely, I was an emotional accident waiting to happen, and the wreck did occur. If you don't know me, or haven't heard the rest of my 'learning to trade' story before, ask me some time about how I had an office lease terminated because of my continual screaming-cussing outbursts - NOT one of the highlights of my life.


Trading Psychology Management Avoidance


People that have an avoidance issue with emotions, have either encountered them before in previous activities, or they are quickly impacted by them soon after they begin trading. However, they view psychology and emotion as personal weaknesses, therefore they won't accept that they exist; through avoidance, this group then believes that they have no need for trading psychology management.


Avoidance is not a solution for anything.


It does not matter what the problems are, or in what context that they are encountered, avoiding your problems will NOT make them go away. Ultimately, they are only going to continue to get worse, and IF an eventual solution is ever forthcoming, it will be so with more difficulty and pain than would have been necessary if it was dealt with 'from the beginning'.


Obviously, everyone would love to go through life, day-to-day and task-to-task, without being confronted with fears and emotions that undermine the ability to perform; it is enough of a challenge to learn the necessary skills without also having to deal with this 'extra crap'. BUT this is not personal weakness to avoid. The person who can accept the problems honestly, instead of with avoidance and denial, is the person with strength AND the person who has the ability to find solutions for these additional challenges.


Actually, it doesn't really matter how you 'feel' about emotions and what they represent. The reality is that if you are going to trade, you are going to be effected by 'your' psychology - this is the only guarantee from trading that anyone will ever receive; this must be understood and accepted from the beginning. Then approach trading with a dual concentration on both method and psychology, developing a trading psychology management plan that is intended to gain control over the emotions brought on by trading, in order to allow focus on trading method evaluation and trading performance.


Author: Barry Lutz


Note: Investments in financial products are subject to market risk.  Some financial products, such as currency exchange, are highly speculative and any investment should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at are those of the individual authors and do not necessarily represent the opinion of or its management. has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you.

Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

By accessing this website, you accept our Terms and Conditions