Learn about Trading Psychology.

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Today we'll study about trading psychology. 

The first thing you need to know about drawdown is that it is, of course, a vital and regular part of trading. We are taking the risk to try and make a reward, and anytime you take the risk, you have to understand that sometimes that risk can go against you now; the psychological part is where things get tricky a lot of people fall victim to their own emotions and their frustrations with their trading which gets them into a lot of trouble think about it this way if you're sitting there and you know things are going poorly for you in life you have options just like anything else you can choose to react positively and to find constructive ways and find solutions to those problems, or you can get upset get emotional freak-out and make some stupid decisions well the same thing happens in trading every day to traders around the world there are so many people who get frustrated they double down they triple down they quadruple down on their positions, or they get agitated. They take a wild trade to try and revenge trade. 

But there is a natural level of drawdown that you should understand that it's okay to take some number of losses. That number of losses is going to depend on your style of trading your strategy. If you're trading with the tight stop loss you should probably expect to have times where you take many small losses in a row trying to capture that more significant win if you're if you have bigger stop losses you should probably expect less losses in a row occasionally but they will still inevitably happen if you're going for something like a one to one risk reward your stop loss should be getting hit you know less than slightly less than 50 ideally right but if you're trading with something that's like a three to one or a four to one  reward to risk meaning that you know for every one dollar that you risk you're trying to make four then in that case it's okay to take multiple losses in a row sometimes because inevitably you only really need a couple wins to really make some serious catch up in your losses so that's one of the biggest things that you need to understand when looking at drawdown and talking about trading psychology is understanding what is expected in your trading performance  what is normal in terms of like a drawdown period and understanding that drawdown itself is actually just going to happen to everyone it's more how you respond to it now.  Do you want to see your account at some point go down 30 -40 per cent? That is something that you have to ask yourself. It doesn't matter how good of a trader you are again; it's going to happen where you have strings of losses, and if you're risking large portions of your account, it doesn't take much to start seeing some severe drawdown build up so again just a matter of preference there when it comes to the risk. 

Now let's see how to deal with the emotions and how to go through that process of when you know you're stuck in a drawdown, you're trying to figure it out. You're trying to work your way out of that drawdown. How do you handle the emotions in the media, and how do you handle just your barriers.

 The first thing to understand about drawdown is one of the quickest problems people cause for themselves, which we think is trying to correct their drawdown immediately. They're down on money, and they're like I need to get that back right now, and we know if you've been watching the markets for a while if you've been doing this for a while, you know the markets don't work like that they don't work where you want to make a profit right now and you can grab one the markets sometimes they're moving sometimes they're not moving. That's the thing if you're trying to make money today in the markets, the markets don't necessarily have to respect your desire, right the markets don't care about what you want the markets to do. It's about what they want to do, and we, as traders we have to be patient enough to get in there at the correct times and find those setups and scenarios that make us some money. So again, the number one thing, do not try and rush your way back to you know out of a drawdown because it is a quick way to make yourself more trouble. If the volatility is not there, if the movements aren't happening, you can't force them to happen just by taking a big position and trying to go all in, it's probably. One of the dangerous most dangerous things that traders do is again get stuck in a drawdown. They're like, I want to fix this right now, and so they jump to conclusions. They jump all into a position and try and make a lot of money in the short term, so don't do that. The next thing is probably you know a drawdown is like a short dip in a long-term uptrend if you have a good plan and you trust your plan.

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