Trading psychology

To illustrate the importance of psychology, the following is a quote from world renowned trainer Dr Van Tharp trade:
"When I discuss what important to trading have had, three areas usually come: psychology, money management (such as sizing position), and system development." System development and the other two issues emphasize the most people slow down. More sophisticated people suggest that all three aspects are important, but the psychology is the most important (about 60 percent), position sizing is the next most important (30 percent) and system development is the least important (10 percent). "When it comes to trade, are one of the most neglected issues with trading psychology have to do." Most traders spend days, months and even years trying to fit to find the right system to them. But the right, the trading system is only a small part of what really Forex or other financial successful action is required. Don't get me wrong, it is always important to find or develop a trading system that suits you, but it is also important to have a well defined money management plan, as also an understanding of the psychological barriers that the dealer can interfere with decisions made in the trade. The trading business to be successful, there must be a balance between these important aspects of trade.
In the trading environment, if you lose a deal, to be probably the first idea that pop would mind "it do something wrong with my system", or "I knew it, I should have not taken this trade" (even if your system indicates it). But sometimes we need the, to find where the nature of our mistake, and work then it accordingly to dig a little deeper. This means look at the possible psychological distortions that you can have when it comes, development and execution of a trading system. This is explained further below more detail.
When it comes to trading with the Forex market, as well as elsewhere, only 5% of the dealer achieve the ultimate goal: winning be consistent. From my research, I believe that the main reason is a lack of understanding of what a dealer actually should be considered, could the mostly their own psychological distortions be attributed to, that they have in the direction of trade.
Psychological distortions Best to explain how the trading psychology only about positive thinking is not, here is an example for how your psychological biases can effect your trading.
Should a new trader, that trade has an interest in the Forex market. She would probably think that a trading system start so that they go off on the Internet and the search for keywords such as "Forex-trading-System" or "trading system". She would probably want to find a trading system that is very accurate, say around 80% + accuracy. The reason for this? From my research, I discovered that this way of thinking is taught by the school system to us at a very young age. School teaches us right 80% + of the time, and if we are not, we will as an error. The Internet can be blamed also. If you for some trading system related to search, you would soon be bombarded with advertising such as "System 90% accurate trade produced" or for the advertisers, who are pushing their luck really: "100% WINS, 250 + buy craft, no losers now!" Everything that cause this advertising, you believe that, that it is necessary to just most of the time to trade successfully.
Now, the problem is two fold. First, their belief that a trading system is so important is not really correct. There are other factors that are as important in fact money management and psychology. And secondly it believe that they will need a trading system, the profits, the a very high percentage that time is not absolute produced correct either.
These are the bias you have towards trading system development, because you still do not understand, what is really involved in the development and implementation of a system that actually works in the course of time.
This is where the 'mathematics' the trading system development and implementation. To illustrate how you don't necessarily have a trading system, which is at least 80% of the time, note the following:
You have a trading system that is right and money only 50% of the time. On average, three times as much as you, you do loose. Let's assume your average profit is 60 pips and your average loss is only 20 pips. The following equation work out how much you can expect to make on average:
(PW multiplied by average profit of 60pips) Minus (PL multiplied by average loss of 20 PIPs) = 20pips.
Key: = Money (or win) the percentage of make time PW, PL is the percentage of time that you lose money.
This means that one would expect to make 20 points with a winning rate of only 50% on average! Now it is important to remember that the purpose of this article not to explain the specifics of trading system development, still the math was involved in. It was to explain, such as your own trading psychology you can trade impact in the way the financial markets.
Conclusion Areas such as trading psychology and money management at an early stage of your trading career understand the profits produced in able to develop a system that consistently and be there with the top 5% of the traders who actually manages to financial markets trading.