In today's post, we are going to explore a critical aspect of trading: "Why trading is 80% psychology and only 20% technical analysis." This topic is essential because, as many of you know, only about 10% of traders succeed, while 90% fail. The question is: Why?
Think back to the first time you considered trading. What were your thoughts and assumptions? Many new traders are attracted to the idea that trading is a quick way to make money, but few think about the required skills and mindset.
If you're starting with the mindset of making fast money, you'll quickly realize that trading is not that simple. Even if you aim to make quick profits, it still takes time, effort, and experience to reach that point.
The Common Misconception: Quick Money from Trading
Many traders jump in without asking themselves key questions such as:
- How much am I willing to lose while learning the ropes?
- Should I expect some initial losses as part of the learning process?
- Am I here to make quick money, or do I genuinely want to learn the art of trading?
It’s easy to get caught up in the excitement of making money, but few take the time to reflect on these important aspects.
Trading is a Long-Term Game, Not a Quick Fix
Rather than focusing on getting rich fast, it’s wiser to focus on gaining experience and understanding the requirements of trading. Becoming skilled takes time and effort—you don’t need a lot of money to start, just the dedication to learn.
Why 80% of Success is Psychology
Technical analysis, while important, is only about 20% of what it takes to succeed in trading. The remaining 80% comes from psychology. Mastering your emotions, maintaining discipline, and having a strong mindset are key to long-term success.
Key Psychological Aspects in Trading
The following psychological aspects are crucial for traders to focus on:
- Emotional Control: Managing emotions like fear and greed, which can cloud judgment.
- Discipline: Following a trading plan, even when things get tough.
- Risk Management: Understanding your risk tolerance and how to manage it effectively.
- Mindset: Developing a growth mindset, embracing failure as part of the learning process.
Emotional Decision-Making: The Impact of the Mind
Emotions like greed, fear, anger, and ego can control our actions and decisions if we’re not aware of them. Becoming aware of your emotions helps you manage them better, leading to clearer and more rational trading decisions.
Developing Ourselves is Key to Success
Developing your psychology is about developing yourself. Self-awareness is the foundation for improving as a trader. When you manage your emotions, you make more rational decisions, significantly increasing your chances of success.
To succeed in trading, mastering technical analysis is important, but it’s only a small part of the equation. The bigger challenge is mastering your psychology. Focus on emotional control, discipline, and risk management, and you’ll be on the path to long-term success.
Remember: Becoming a great trader takes time, dedication, and a commitment to continuous improvement. Stay patient, keep learning, and the results will follow.