Psychology plays a crucial role in trading. It isn’t just about looking at charts and analyzing information — to make the right calls when trading, it’s crucial to stay calm and manage your mindset. This is especially true in the world of funded trading, where the pressure to pass a challenge can be immense.
In this article, we’ll cover how you can boost your chances of success by remaining disciplined and focused, with practical tips.
Understanding the psychological challenges in funded trading
While all types of trading involve similar pressures and challenges, funded trading has its own unique quirks. Let’s explore them in some detail.
Why mindset matters for funded traders
As a funded trader, you’re not using your own money when trading — but you’re faced with the unique challenge of having to prove yourself to a prop firm.
Most traders have to pay a small fee to have the privilege of joining a trading challenge, which can be one source of stress in trading.
When people are under too much pressure, they’re more likely to make rash decisions — and in the case of trading, this can result in losing too much money. Funded trading challenges often place restrictions and rules on traders (such as needing to stick to a certain drawdown). Therefore, making impulsive choices resulting in losses could make you lose out.
Whether you’re managing a forex funded account or trading other asset classes, the stakes remain high, with strict rules and expectations to adhere to.
Common psychological pitfalls in funded trading
The pressures outlined above tend to manifest as either greed or fear.
Being too greedy can often happen in funded trading when people become too hungry to pass a challenge and impress their prop firm. It often leads to impulsive decision-making and risky trades in the hopes of achieving huge wins.
On the other hand, fear arises out of the anxiety of failing the trading challenge. It could lead to a trader prematurely selling assets that aren’t achieving the performance they hoped for, which often results in a bigger loss than waiting for them to recover more.
The role of discipline in achieving trading goals
While there’s no avoiding the fact that funding challenges can get stressful, succumbing to their pressure isn’t inevitable.
Building routines for consistent trading performance
Traders who are in touch with their own psychology determine what works for their brain and make a trading routine based on that.
For instance, this routine might involve:
- Deciding how much you’re willing to lose on an asset before you sell ahead of time so you can follow this rule.
- Deciding at what price you’ll sell an asset when it gains value ahead of time then sticking to this decision.
- Choosing a trading strategy that you feel comfortable with, such as day trading or swing trading.
- Identifying the risk tolerance you’re most comfortable with.
- Committing to regulating your emotions in tangible ways (as detailed in later sections)
How discipline impacts funded account success
If you’re able to stick to the routine you set yourself, it can make all the difference to your chances of succeeding in funded trading.
When you stick to the rules you set yourself about the price at which you’ll buy and sell assets, you can rest assured that you’re making trading choices based on your head and not your emotions.
If you have the discipline to follow your trading strategy and risk management techniques, your results will be more predictable and consistent.
Staying focused in high-stakes trading environments
So, how exactly can you cultivate the discipline you need to get results? We’ve compiled some tips below.
Techniques for improving focus during trades
Some possible ways to improve focus during trades include:
- Meditating before a trading session
- Using breathing exercises that you can complete in the moment when you feel the stress rise
- Avoiding too much caffeine or heavy meals before a trade to help you keep focused
- Taking a break from your trading to do exercise, such as taking a walk
Handling distractions in trading
It’s also important to create a calm, distraction-free environment for yourself. If you have your phone next to you and it can vibrate with notifications at any moment, it results in a loss of focus.
Instead, put your phone on silent mode.
Other possible distractions include:
- Family or roommates you share your house with
- Pets
- Music
- Food or drink
Emotions in trading: How to manage stress and anxiety
Now, let’s turn to how you can deal with stress in trading when it arises.
Recognizing signs of emotional trading
Some signs of emotional trading include:
- Failing to stick to any rules or strategies you decided previously
- Trying to “recoup” losses you’ve made already, even if it means making risky choices
- Feeling anger, fear, or excitement
Tips for staying calm under pressure
Half of the battle is being able to recognize that you’re feeling stressed and vulnerable to making a rash decision.
Once you recognize these emotions, you can apply some of the strategies outlined above, such as meditation or breathing exercises.
The importance of thinking in probabilities
We can’t accurately predict what the market will do tomorrow. But we can think about the probabilities of certain outcomes. This is known as probability-based trading.
Viewing losses and wins objectively
As they say, you win some and you lose some. Even the most skilled trader makes mistakes sometimes, so it’s important to internalize that it’s statistically impossible to be right all the time.
Look at your losses and wins objectively.
Practicing a probability-based approach
To take a probability-based approach, you need to think about the risk-reward ratio of your trades. Essentially, the higher the potential for a win is relative to the loss, the higher this number will be.
If you have larger wins, you need to have fewer wins overall to turn a profit.
Leveraging community support for psychological resilience
One of the benefits of joining a funded training program is that you’ll be able to join a cohort of like-minded traders. This gives you an opportunity to learn from others and receive support.
How trading communities support discipline and focus
When you’re training as an individual, it’s down to you alone to stick to the routine and rules you set yourself. But when you’re part of a community, others will encourage you to take accountability and stay on track.
This is the beauty of community support for traders.
The benefits of shared experiences for funded traders
As we’ve explored in this article, it can be tricky to recognize when your psychology is getting the better of you during trading, and knowing what to do to change it.
When you’re in a community with other funded traders, you can share your experiences of how to recognize these dangerous emotions and strategies for overcoming the emotions.
Whether you’re a beginner or an advanced trader, there’s a place for you to learn, grow, and excel. Join the Challenge4Trading Discord today and discover a community built to support your success.
