One of the most important factor regarding trading is psychology and behaviour of people. The same way as you sit behind your computer, other people trade at the other side of the wire. When you analyse a chart, other people do it as well and try to generate profits, so we can call them competitors.
Therefore when you are looking at the chart, you should see it as a huge amount of people, organizations or even governments, behind computers. Everything that happens on the chart has it’s meaning and reason, however, the reason is not as important as what is actually happening with the chart. This part of the psychology is further explained on the next chapter – Supply and Demand
So how to work with psychology ?
- When the price gets to the point where you would like to open your trade, hold on and wait for the price action.
- If you think that the price is “too” high so it “must” go down now, in most of the cases it is not true, because the thinking of other people can be different (eg. when they look at higher timeframe)
- If your trade was successful and you earned money, it means that somebody else must have lost. It works the same other way around. However, you need to understand that we count profits within some range of time. So for example you count successful and unsuccessful trades for last month and you see the profit or loss.
- If you see that your prepared trade, in some point, is doing something unusual and you are loosing the confidence, do not open the trade and wait for the price action. You just could have been wrong and that also happens 🙂