Psychology of Trading: emotions, discipline, behavioral traps

Technical analysis and strategies are important, but most traders fail not because of a lack of knowledge, but because of an inability to control emotions and adhere to discipline. Trading psychology is a separate and extensive field that requires in-depth study and continuous work on oneself.

Key topics of trading psychology

• a) Core emotions in trading:

• Fear (fear of missing a move, losing profits, taking a loss)

• Greed (the desire to earn more, reluctance to take profits)

• Hope (holding losing positions while waiting for a reversal)

• Euphoria (after a series of profitable trades, leads to excessive risk-taking)

• Revenge (attempting to "punish" the market after a loss).

• b) Cognitive biases of traders:

• Confirmation Bias — the tendency to seek information that confirms your point of view and ignore contradictory information

• Survivorship Bias — focusing on success stories without analyzing failed outcomes. This approach distorts market perception: instead of understanding real risks, the trader sees only a "showcase of success". Analyzing mistakes and losing scenarios helps eliminate dangerous situations in advance rather than repeating them in practice

• Illusion of control — overestimating one's ability to influence the outcome of a trade

• Recency effect — assigning greater weight to recent events (after a series of losses, it may seem that nothing works)

• Anchoring — excessive attachment to the initial entry price when making decisions

• Endowment effect — overestimating the value of an asset you own.

• c) FOMO and FUD:

• FOMO (Fear Of Missing Out) — fear of missing an opportunity, leading to impulsive entries at market tops

• FUD (Fear, Uncertainty, Doubt) — panic and uncertainty that force selling at market bottoms

• How to recognize these states and counteract them

• Techniques for making rational decisions under conditions of mass euphoria or panic.

• d) Developing trading discipline:

• Creating and following a trading plan

• Self-control techniques and delaying impulsive decisions

• Rituals for preparing for a trading session

• Working with rule violations (analyzing causes rather than self-blame)

• Balance between flexibility and rule rigidity.

• e) Stress management:

• Signs of trader burnout

• Techniques for rapid stress reduction (breathing exercises, meditation)

• Importance of physical activity and quality sleep

• Building a supportive environment (communication with other traders, mentors)

• When it is necessary to consult a psychologist.

• f) Working with losses:

• Accepting losses as an inevitable part of trading

• How to avoid the "revenge trading" effect after a series of losses

• Techniques for emotional reset after a major loss

• Difference between a normal drawdown and a signal to stop trading.

• g) The danger of trading addiction:

• Signs of an unhealthy relationship with trading (obsessive thoughts, ignoring other areas of life)

• Similarity to gambling addiction and how to avoid it

• Establishing healthy boundaries between trading and personal life.

Recommended literature:

1. "Trading Psychology" — Brett Steenbarger

2. "The Disciplined Trader" — Mark Douglas

3. "Thinking, Fast and Slow" — Daniel Kahneman (on cognitive biases)

4. "The Black Swan" — Nassim Taleb (on unpredictability and risk management).

Practical exercises:

1. Keeping an emotions journal alongside a trading journal

2. Mindfulness meditation 10–15 minutes daily

3. Delayed decision practice: wait 5 minutes before entering a trade

4. Simulating losses on a demo account to train emotional resilience.