Psychological Conditioning in Online Trading

The psychological sphere plays a huge role in online trading. After all, although the collective imagination portrays them as cold, rational, and calculating individuals, traders are first and foremost human beings. Therefore, if an aspiring trader wants to be successful and aims to enter that small group of people who make money with trading, it is essential to immediately come to terms with the psychological pressures that surface when going to market. In some cases, physiological psychological pressures take on the shape of real conditioning. Trading activity is affected by this and is somehow directed by the factors that determine such conditioning, ultimately leading to true compromise. In the following article, we delve into the role of psychological conditioning in online trading, listing the various types of conditioning and the wrong attitudes that result from them.

Internal psychological conditioning

Most likely, internal psychological conditioning, i.e., that deriving almost exclusively from one's mental structure or from a "material" state of affairs but attributable to oneself, is the most difficult to eliminate. Three, in particular, generate a truly significant impact. Personality. The heaviest psychological pressures come from one's personality and character. After all, facing the market, an entity by its very nature devoted to uncertainty, is not for everyone. It is necessary to have acquired or possess (some are lucky and have a predisposition) an adequate mental structure: resistance to stress, coldness, lucidity, resilience, and ambition are just some of the fundamental skills. Conversely, an individual who tends to be emotional and easily loses self-esteem is destined to suffer the influence of their psychological sphere excessively. Knowledge. Obviously, it is impossible to even think about practicing online trading without adequate knowledge and without having completed a comprehensive training program. However, even an aspiring trader who has always acted in perfect good faith may arrive at their appointment with the market with insufficient baggage. In this case, sooner or later, they will feel they are behind schedule and begin to develop a certain insecurity. This insecurity then easily turns into fear... until it becomes true internal conditioning. Wealth. Apparently, one's financial situation should have nothing to do with the psychological sphere. Yet, it has a significant impact. If a trader has substantial capital and is aware that even if they were to lose three or four trades consecutively, their financial situation would remain stable, how will they behave? Certainly, they will act with a greater sense of security and less fear. In the worst-case scenario, if they were to drift, they would act recklessly and brazenly. Regardless of the consequences, the financial situation has a psychological impact.

External psychological conditioning

External psychological conditioning refers to all those psychological pressures that arise from external factors, which do not depend on one's actions or mental structure. These are the most complicated to remove, also because they do not depend on one's will. However, they are also the ones that are easiest to come to terms with. Limiting their effects may not be so difficult. The time factor. Often, we don't think about it, but most traders do not operate full-time. They simply don't have the opportunity. They have to do other things to live and support themselves, at least until they have accumulated the necessary experience and made the transition to professionalism. Time can generate psychological pressures. If you don't have much time available for trading but feel the need (also for a matter of self-esteem) to generate results, a condition of stress can emerge. In fact, additional stress, given that this particular mental state is practically the prerogative of any speculative investment activity. Market phases. Let's make one thing clear: the market is always uncertain, at times unpredictable. This uncertainty, in turn, generates psychological pressures, not least the simple fear of making a mistake. However, in some periods, the market is more unpredictable than usual. In fact, less readable. It is at these times that the trader - at least the less experienced one - no longer knows what to do. Again, additional stress emerges, which can turn into real psychological suffering. In this case, experts simply advise waiting for the storm to pass, so as not to risk unsustainable or, worse, useless losses (even for the purposes of the path of improvement and self-work). The trading community. Obviously, this factor only affects those who see trading in a "social" sense, i.e., those who frequent a trading community and occasionally draw strength, skills, and useful advice for their activity from it. To tell the truth, trading is very often a solitary activity, but there are also those who belong to the other side. In the latter case, as in all communities, the individual is influenced by the group. In the best-case scenario, in a positive sense; in the worst-case scenario, undergoing pressures, not necessarily consciously. If the group one is frequenting produces a certain type of performance, this generates undue pressure and somehow raises the bar for the individual who may be struggling.

Typical and frequent trader errors

These psychological conditionings lead traders to make some mistakes, especially in terms of attitude. Here are the most frequent ones. Under-trading. This happens especially when psychological pressures inhibit the trader. In this case, the dominant feeling is fear. The risk is not seizing opportunities when they arise and triggering a vicious cycle that only produces lack of self-esteem. Over-trading. It is the exact opposite and coincides with "too much trading," thus with high exposure. It happens when, for one reason or another, one seeks redemption or is taken by a feeling of euphoria. Excessive risk propensity. This occurs in many cases, not least the sense of emulation typical of individuals who are subject to the group (if the group obviously, rightly or wrongly, behaves in a certain way). Leverage too high. The need to operate with high leverage, perhaps greater than 20:1, can depend on many situations. Anxiety about a limited starting capital, but also the desire for redemption after a defeat. Poor acceptance of losses. It is not easy to accept defeat, yet it must be done. Also because they represent an irreplaceable part of trading activity. If one is unable to accept the loss, one would not be able to re-elaborate it. In this way, any possibility of learning from one's mistakes would be precluded. Adopting strategies not suitable for one's style. This is one of the consequences of the community's impact on the individual. Generally, the individual replicates the behavior of the masses. In this case, it is truly a mistake, also because each trading style (or even just each personality) corresponds to a type of strategy.