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TRADING #101 COURSE – PART II TWO: SUCCESSFUL TRADING PIE – WWW.TRADERSCOACH.COM

Chapter 12:

Fourth Slice - Financial Psychology

Psychology is probably the most elusive piece of the trading pie for many traders. As we
discussed, there are four pieces to the trading pie that you must master to be
successful. These pieces are: your trading and investing rules, scanning for
opportunities, money management, and finally, your financial psychology.

This topic of psychology is abstract and nonlinear, and that may be the reason it is so
challenging to master. Human emotions and their resulting reactions to inputs vary
dramatically from person to person. The factors affecting each trader’s psychology can
be complicated and diverse, and I will say that successful traders tend to truly know
themselves better than the average person does.

The process of trading forces individuals to look inward to confront issues that along the
way they discover are holding them back from being profitable.

Successful traders are introspective if for no other reason than they must look inside to
maintain discipline and consistency in their approach. Knowing themselves and their
natural tendencies, for better or worse, is the only way to achieve consistency and
discipline in all facets of their job.

The surprising fact is that even the most successful and developed traders face new
psychological issues as they continually move up from one profit plateau to another.

Working on your psyche will be a lifelong endeavor, but a rewarding one. My advice is
that you continually explore and cultivate strengthening your psychology, since with
every new plateau you will face a new and different set of emotional challenges.

This chapter is not designed to be the end-all solution for finding every answer to
mastering and maintaining your own personal financial psychology. It is meant to outline
areas of study and basic principles that one should be aware of to tame the emotional
beast that lies within us all.

The Trader’s Mind-Set

The goal is for a trader to develop and maintain what I call the trader’s mind-set to
become consistently profitable. There are certain qualities of this state of mind that can
help you to know if you are on the right track.

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