The Prop Trader's Chronicles: Short-Term Proprietary Trading Strategies for Both Bull and Bear Markets

CHAPTER 10

The Psychology of Profitable Trading

Psychology is often held high on a pedestal throughout the trading business by people who wish to sound knowledgeable. In many cases, they may actually be spreading some crucially useful information for a trader's career development. The problem is when beginners latch on to chronically unprofitable trading methods with stubborn conviction and then convince themselves that if only they could conquer their psychology, their trading method would magically transform into a golden goose.

If this sounds familiar, it's nothing to be ashamed of. It's just a misunderstanding of some well-meaning pieces of advice that have floated around for years about trading psychology.

Psychology does, and always will, play a very significant role in a professional trader's career, there's no doubt about that—but fixing it will not magically transform an unprofitable trading strategy with a significant negative expectancy into a wealth-building machine with positive expectancy.

Additionally, some of the less often discussed issues in a trader's psychology will come into play at two major points of a trader's career:

1. When periods of outsized profits come suddenly to a trader who has, for his or her entire life, been unaccustomed to the level of income produced by such profits. (This obviously varies widely for every individual, but most of the developed world's middle-class youth is simply not accustomed to the psychological effect of a $15,000 net ...