CEX.IO company blog | Trading psychology: how to make decisions and not make mistakes. Part 1

Every time a trader performs trading operations, he experiences psychological pressure, and this is not surprising.A person stands before the choice and certainly faces questions such as "Do I take any risks?", "Will workis the operation in my favor?", "Did I understand the market situation correctly?".Some people like this picture, whereas with others they canto play a cruel joke.

The media are overflowing with different sources of market analysis, trading signals, predictions, comparisons of experience and trading ideas between market participants and others.They are a kind of "support" of the trader.

But there are some elements that can lead a trader off the right path:

— The effect of the habitual

As in many other aspects of life, inin trading, we find psychological comfort in the usual things. This is because, faced with a familiar situation, we know what to expect next. Feeling “in control of the situation” makes it easier to relate to it.

But always sticking to the once workedstrategies, instead of experimenting, you can make mistakes. It is important for every trader to remember that no indicator ever works on its own. He just indicates the probability. And instead of blindly trusting one indicator, additional analysis is needed.

— Fundamental belief only in Bullish or Bearish market sentiment

Indeed, some traders are morelean towards short or long positions. This is fine, but this tactic should not be followed on an ongoing basis. In other words, if a trader is a lover of short positions, but the market situation is actively showing a long attitude, then persisting and going against market trends is the way to losses.

— Countering the “crowd effect”

The crowd effect is collective behaviortraders as a single group, leading to the implementation of certain patterns by which traders make deals. These patterns are well known. Therefore, noticing them, users begin to open deals in one direction or another. Don't consider yourself an expert and go against the general market sentiment. By understanding the crowd effect, you can use it to your advantage.

These are not all elements that can put pressure on the psychological state of a trader. We'll talk about others in future posts.

If you have trading experience, we invite you to share your opinions and impressions in the comments.

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