The Human Mind & Trading

In the last article (The Secret) we established that we must leave our emotions on the sidelines and become mechanical in our trading, the two emotions mentioned as glaring obstacles to us as traders are fear and greed, and there is no “Holy Grail” or secret to becoming a consistently profitable trader of any market.

Now let’s talk about the human mind. First, the human mind is like a computer. Data is continuously being input from all aspects of our lives throughout each moment of each day. We make connections between pieces of data in order to optimize our retention of information we need. And, we filter out data that has no use to us in order to open up space for new information. Ultimately, our minds work as an instrument that searches, focuses, and creates maps of information by which thinking is contrived. Consequently, it is highly likely that we come to any task being influenced and with a biased in some way.

Simply put, we not only collect new information but we bring old information to everything we do. We focus on information we select because we have this intricate aspect of our minds that can protect us in some situations and hinder us in other situations. This selective focus and the ability to see what we want to see and remain blind to what is not aligned with what we want to see is where I want to focus our discussion. It is important to note that the human mind is very efficient and reliable in a focused search for one item such as your missing wallet. However, the human mind is not so efficient and reliable when forced to process blasts of multiple pieces of information. This is especially true in an environment, that is ever changing, risky, and in a constant state of uncertainty. Any market we may trade is exactly the environment described in the previous sentence.

How does the discussed aspects of the human mind handicap us as traders? First, when we approach our charts each day, we often come with our preconceived ideas of market behavior (bullish vs. bearish). Before we even look at a chart at the start of our trading session, we are biased and bias leads us to see what we want to see and not what is actually playing out in front of us. Furthermore, the market’s behavior is playing out live in front of our eyes which means we are being bombarded with new bits of information. Not only is our thinking skewed by our preconceived ideas but we struggle to process all those bits of new information. Consequently, our trading ideas and trading decisions are based on information that is not accurate.

Now, this may seem to be a problem with no answer; however, I am here to tell you that there is an answer to our handicap as traders. The answer is two fold and very simple. First, come to the market with an open attitude. If your attitude is open then you can see new information, as it unfolds, and fit it into your thinking process. Second, approach the market with humility. Accept the reality of how our minds work and search for the “truth” in your charts. Use the tools, in your trader’s tool box, you have acquired for the purpose of seeking clarity in your view of price action unfolding in front of you. The purpose is to be able to make wise trading decisions which will ultimately allow you to become a consistently profitable trader.

How can FxST help you with your handicap as a trader? We offer the following three tools for our traders:

  • The Matrix charting software that presents a short term view of the market and keeps you aligned with that view.
  • A trading room where a community of traders watch, discuss, and engage with the forex market. The room is led by FxST’s experienced traders.
  • Ongoing education in order to foster your individual development as a trader of the forex market.

In conclusion, the trader’s mind is a computer that collects and processes masses of information as it plays out in price action on a chart. The successful trader meets the market each day with a clear, unbiased attitude so that the price-action “movie” being played out on the charts can be accurately read and appropriately acted upon.

Profitable trading to all!

Debbie Badawi

FxST Education Specialist

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Author Bio

Dr. Debbie Badawi’s formal education, training, and career is in the field of education. Ten years ago, upon an early retirement, she entered the world of trading equities and then found her passion in day trading and swing trading the Forex Market. Although she trades various currency pairs, she spends much of her trading focus on the EUR/USD. In addition to trading, Debbie mentors other traders, works with the team at FXST, and runs her educational consulting business where parents find educational solutions for their children. When asked what’s next or what’s Debbie’s future? Debbie smiles and precisely says, “ a simple life comforted by a six figure income and a financially free retirement.”

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