Trading Psychology

FOMO is the most prevalent psychological trap for traders. Overcoming methods: 1) Cognitive reframing: market always has opportunities, missing this one there's next. Better to miss 100 point profit today than chase and lose 50 points; 2) Establish entry criteria: only enter when meeting your strategy (like breakout + retest confirmation), if not meeting don't trade, never lower standards fearing "missing out"; 3) Set trading frequency: maximum 3-5 trades per day, stop when reaching limit, avoid impulsive opening; 4) Review history: track trades made due to FOMO, win rate typically <30%, understand chasing is losing not missing; 5) Redirect attention: after missing opportunity, close chart 5-10 minutes, do other things, avoid impulsive chasing. Remember: professional traders may only make 1-2 high-quality trades per day, rather miss than make mistake.

Revenge trading is the main reason small losses become big losses. Prevention methods: 1) Daily loss limit: after reaching 3-5% account loss, force stop trading, close platform, come back tomorrow; 2) Emotion recognition: when feeling angry, unwilling to accept, wanting to "win back", this is revenge psychology, stop immediately; 3) Pause and cool down: after each stop, pause 5-30 minutes (scalping) or 1-2 hours (day trading), make no trading decisions; 4) Review analysis: why this loss? Strategy issue or execution issue? Write it down, not immediately open new position; 5) Set physical barriers: after stop, need to re-login platform or enter password to open new position, increase decision time. Psychological technique: view each trade as independent event, this loss unrelated to next profit, no "recovery" concept exists.

Trading discipline is core differentiator between profitable and losing traders. Building methods: 1) Written trading plan: write clear entry/exit/stop/position rules, print and post by screen, check before every trade; 2) Checklist system: before opening must confirm 5-10 criteria (like "meets strategy?", "stop set?", "risk ≤2%?"), all checked before opening; 3) Accountability mechanism: find trading partner or mentor, share daily trading records, mutual supervision; 4) Reward-punishment system: strictly execute plan for one week, reward yourself (like buying desired item); violate plan then punish (like donate $100); 5) Automation tools: use EA or scripts to auto-set stop/target, limit trade frequency, auto-close trades when limit reached. Most important: start with small account ($500-1000), build discipline first, then increase capital. Have discipline on small account, will have discipline on large account.

This is "Hot Hand Fallacy" psychological bias. Consecutive wins make you mistakenly believe "I'm on fire now, can do anything", leading to: 1) Increase risk: jump from 2% to 5-10%, thinking "this one will definitely win"; 2) Lower standards: enter even when not meeting strategy, thinking "I can profit from anything now"; 3) Overtrade: make 10-20 trades per day, far exceeding plan. Solutions: 1) Cognitive correction: each trade is independent probability event, previous 5 wins don't mean 6th will win; 2) Fixed risk: regardless of wins/losses, always maintain 2% risk, never increase because "feeling good"; 3) Rest after wins: after 3 consecutive wins, pause trading 1-2 hours, calmly evaluate if truly high-probability opportunity; 4) Record data: track trades during "overconfident period", you'll find actual win rate may be lower; 5) Set profit cap: stop trading after daily profit reaches 3-5%, protect profits. Remember: market doesn't care how much you made before, each trade is new battle.

Trading journal is essential tool for professional traders. Effective methods: 1) Record content: each trade record entry/exit time, price, position, stop/target, result, screenshot, entry reason, exit reason, emotional state (1-10 rating); 2) Daily review (5-10 minutes): review all trades today, which met plan? Which were impulsive? How did emotions affect decisions?; 3) Weekly review (30-60 minutes): calculate win rate, average profit/loss ratio, maximum drawdown, best/worst trades, common error patterns; 4) Monthly review (2-3 hours): deep analysis: which trade types most profitable? Which most losing? Which timeframe/pair performed best? Need strategy adjustment?; 5) Key questions: each loss ask yourself 3 questions: did this trade meet strategy? If doing again what would I do? What did I learn? Tool recommendations: use Edgewonk, Tradervue or simple Excel feesheet. Key is continuous recording (at least 6 months) to discover patterns and improvement directions.