Most people who begin trading believe that being a good trader is equivalent to being a good market analyst. While sound market analysis does contribute to success, it doesn’t deserve the excessive focus many give it. Functioning effectively in a completely different environment – one with unique characteristics and dynamics – requires us to adapt our thinking and learn to adjust to new conditions. Developing the right psychology is essential for successful trading. To trade successfully, we need to let go of the typical mindset of everyday life and cultivate a “trader self” that can navigate the jungle of the markets. Reaching the ideal trading mindset requires not only understanding our own nature but also that of the crowd.

The market is driven by real, flesh-and-blood people, where emotions, fears, and desires influence movements as much as professionalism does. If we understand human psychology, we can anticipate market movements, which can ultimately lead to financial success. The collective mood in the market dictates price fluctuations – what traders currently think about a particular instrument, any new information about the product, or extreme, unexpected events. Of course, there are times when the collective will is overridden by insiders moving prices in a favorable direction for them through large financial leverage. This is simply part of the nature of the market and cannot be avoided.

The market environment is a psychological wilderness where each person acts for themselves. Studying the crowd is not particularly difficult; psychology can give us an accurate picture of human behavior. However, in stock trading, we ourselves become part of the crowd and can no longer see things entirely clearly. To achieve a successful trading attitude, it’s just as essential to understand our nature as it is to understand the crowd’s.