Trading psychology
Build rules for FOMO, revenge trading and overconfidence.
01
FOMO compresses your process
Fear of missing out creates urgency: the analysis gets shorter, the entry gets worse and the risk is often ignored. Build a rule that no trade is allowed without a written trigger, invalidation and position size. If price has already moved beyond the planned area, the setup is no longer yours.
02
Losses can trigger revenge
After a loss, the urge to win it back can cause larger size, lower-quality setups and rapid re-entry. Use a cooling-off rule after a full-risk loss, and set a daily or weekly loss limit that ends trading automatically. The purpose is to protect decisions when judgement is under pressure.
03
Judge the decision, then the result
A profitable rule-breaking trade is still a poor decision because it rewards behaviour that can become expensive. A planned loss may be a good decision because risk was controlled. Review whether you followed the process before reviewing the profit or loss.
Practice exercise
Write three personal circuit breakers: one for a missed entry, one after a full-risk loss and one after an unusually strong winning streak. Make each rule specific enough to follow without negotiation.
Knowledge check
Why can a winning trade still be a poor trade?
Because a favourable outcome can come from a decision that broke the plan or took uncontrolled risk. Repeating that behaviour can damage the account over time.
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