Scientific Trading Psychology

Hello people.
My name is AmirReza Moshkani.
I’m a forex trader. Have been Trading for almost 6 years. I’m also a master’s psychology student, I’m planning to run a study on psychological factors that enhance trading learning process.
I would love anyone to tell me what is the trading psychology question that you haven’t found an answer to!
Please share your ideas.

95% of traders lose money trading, although by far the majority have more winners than losers -


[Edit - ANd since ypu are clearly looking for your PhD subject - What can they do to reverse the situation by way of psycholgical adaption ? ]

If you work on your psychology, that’s fine. But don’t go deep into this fact rather you should learn how to properly analyze the market to generate a good market forecast. I think it will benefit you.


Seen as though your doing a master’s in psychology and already an experienced trader .Im sure you know more than the majority on here .So your opinion s will be be welcome.The ones who are already successful trading ,are probably not interested.

Actually experienced traders also suffer in this market due to poor psychological factors. I think he should work on his psychology if he thinks it is even more important to him.

Thanks for the comment.

I think what you are referring here is the cognitive strategy. Actually it is a subject less studied in the field of investment and trading.


What I am about to say is going to be controversial . . .

Talk of ‘trading psychology’ is pure nonsense!

It has become a niche industry full of smoke and mirrors. Like snake oil salesmen of old, certain trading gurus try to convince aspiring traders that the source of all their problems and lack of profitability is down to their poor psychology. They will then follow up by trying to sell them a solution, usually in the form of a course!

It’s all nonsense!

You disagree?

Okay, allow me to explain . . .

The overwhelming majority of people who try their hand at trading will fail miserably.

That’s a statistical fact.

They will lose money, blow accounts and, in many cases, never attempt trading again.

The statistics are grim to say the least.

In order to understand why the rate of failure is so high, you have to begin by understanding the core reason that most people lose and I’ll give you a clue - it has nothing to do with their psychology.

It is because they don’t actually have an edge in the markets!

Your edge in the foreign exchange market can come from the particular strategy you are using, or your approach to money management, or even the specific way you manage risk perhaps. It doesn’t really matter what your edge is or where it comes from. It only matters that you have an edge. You can not and will not become a consistently profitable trader without a quantifiable edge. It really is that simple.

After identifying your edge and thoroughly testing it, you should then write out a trading plan detailing your exact edge. Profitable traders plan their paths to profit.

You remember the story of Odysseus tying himself to the mast so that he wouldn’t be lulled by the song of the sirens and inadvertently wreck his ship?

A good trading plan effectively ties you to a mast. If your only rule is to follow your trading plan, you can’t and won’t be lulled by the song of the sirens.

Once you have a detailed and comprehensive trading plan in place, psychology should play no role in your trading. If it does, and you find it difficult to stick to your trading plan, you haven’t got a ‘trading psychology’ problem, you’ve got a gambling problem!


Well gambling problem is a form of psychological behaviour there are many articles covering this type of behavior.
I do agree with you that psychological problems are only a part of a successful trading. Although I have to tell you that successful traders show specific biases and they have higher than average Emotional intelligence.
Now what is not clear is that the successful trader has acquired these investment behaviours by experience and study or this trader has had a higher than usual Emotional Intelligence and biases such as functional over confidence and optimism and… Prior to his or her trading journey.
And no study points out what cognitive strategies do successful traders use to cope with the negative emotions caused by clusters of bad luck and emotions associated with clusters of good luck such as greed.

There are many aspects of investment or trading psychology that need to be researched
To give a clearer insight to the trading society. These researches can hopefully decrease the amount of time required for becoming a pro trader.

By the way I believe a trading system must include psychological tools to control the fear of missing out and greed and Over_Trading.

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Thanks for the reply.

You’re quite right, a gambling problem is deeply rooted in a person’s psychology. That’s my point, someone with a gambling problem has little or no chance of ever becoming a consistently profitable trader. Their psychology will always get the better of them until they address their gambling issue. The problem is, they may not even realise or accept they have a gambling problem.

In my early twenties I used to play poker for a living and I would often come across certain players who, from listening to their conversations, thought that they knew how to play really well but in reality consistently lost (victims of the Dunning-Kruger effect). They could never see themselves for what they really were: degenerate gamblers.

The same thing happens with a lot of aspiring traders: they think that they are smarter than they actually are - even when there is evidence to the contrary such as mounting losses and blown accounts. In a lot of cases the only reason they carry on is because they have an unacknowledged gambling issue. The problem is they may not see that much less accept it.

You mention that successful traders show specific biases. I would agree. So do unsuccessful traders.

Even though I think trading psychology is largely nonsense, for reasons I will clarify in a moment, I would concede that an understanding of cognitive biases is potentially useful for traders. Allow me to explain.

Biases tend to come in clusters. Numerous experiments have proven this time and time again. What this means is that if a person is prone to one type of bias, they will probably also be afflicted by other biases. In other words, if someone is prone to confirmation bias, for example, they will also likely be prone to overconfidence bias and logical fallacy biases.

Unfortunately, even if you are aware of such biases, it doesn’t necessarily afford you any protection from them as Daniel Kahneman points out in Thinking Fast and Slow.

Now, even though forewarned may not necessarily be forearmed, I must admit I do have a copy of Rolf Dobelli’s The Art of Thinking Clearly that is never far away from me. It basically amounts to an index of thinking errors that I read and re-read on a regular basis. I delude myself into thinking that it keeps them fresh in my mind and that I might be able to therefore avoid them and root them out at first sight.

On the positive flip side, the reverse is also true. If someone is self-disciplined, they are also more likely to be patient and emotionally balanced perhaps.

However, the reason I think none of this matters, and that ‘trading psychology’ is largely nonsense, is because if an aspiring trader truly understands how concepts like risk management, capital allocation and expected value really work and if they have identified a proven profitable strategy, they can have every confidence in their expected long-term return regardless of any short-term variance in their results. It’s only when a trader doesn’t really understand these concepts that they become emotionally involved and then start making suboptimal decisions like deviating from their trading plan.

For example, I trade one account with a strategy that produces just a few signals a month. Hence I’m working with a relatively small sample size and therefore my short-term results are likely to be quite volatile and not necessarily indicative of the true profitability of the said strategy. However, because I have a deep understanding of the concepts I’ve mentioned above and confidence in my strategy, I am not perturbed by short-term variance in my results. In short, psychology and emotions play no part in my decision making process. I have a plan and I stick to it.

That’s why I have to say, with respect, that I totally disagree that a trading system must include psychological tools. If anything spending too much time delving into the ‘psychology of trading’ can hinder an aspiring trader’s results.

The foundation of your trading system should always be a proven strategy. You then need to elucidate that strategy in a thorough and well written trading plan and then simply stick to it.

Not only should a comprehensive trading plan be enough to keep you on course, it should also act as the canary in the coal mine. If you are having problems sticking to a trading plan that you had full confidence in at the research and development stage, it could be an early indication of a problem you may not even realise you have.

Anyways, that’s just my humble opinion . . .

every human suffers about psychological issue even child also . but in society we ignore this issue , when anyone talks about this people react as like he or she has mental disorder . but we should focus on our mental health besides physical

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Your words will fit well into your dissertation - however - along with “cognitive dissonance” and “cognitive bias” - they are generally meaningless to those who are reading your thread - what I am referring to is the fact that people are 250% more in fear of losing money than they are greedy to gain more !

They demonstrate this by closing losers early (FEAR of them tiurning into losses) and letting losers run in Fear of accepting that they have lost money and in the “Hope” that the trade might come right.

As I said ;

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95% traders are loser from this trading place , i still dont know which organization declare this statistic . but i have been seeing this from my first day of trading , i have a clear doubt about this number.

That figure s probably on the LOW side - why do you doubt it ?

{Edit - please show why you doubt it - and I’ll talk it through for you }

The amount is nt that high considering a large proportion, won’t even bother to learn how to trade