After going through many painful experiences, I have answered the question of why psychology is important in trading? Sharing this for those who need it.

Trading is not like mathematics, where applying the right formula yields results.

In trading, you can follow your plan 100%, yet the market may still go against you; at that point, psychology will determine whether you continue to act wisely or ruin your account.

Bad psychology will make you:

Hold onto losses because you are afraid to cut.

Take profits too early because you fear losing gains.

Enter revenge trades after losses.

Increase position size irrationally due to greed.

A trader who just finished learning the EMA + RSI + support zone trading system

He has a clear plan:

Buy when the price exceeds EMA21 + RSI > 50

Stop loss 1%, take profit 2%

Risk per trade is only 1% of the account.

🧠 But when entering real trades:

The first trade goes negative -0.8%, close to hitting stop loss → fear arises, exits early, loses 0.8%

Then the price reverses and rises sharply → regret, feels "like a mistake"

The second trade wins slightly → but still exits early due to fear of reversal.

By the third trade, he loses → the urge to recover arises, increases lot size by 3.

The loss is significant, losing 5% of the account → panic, no longer daring to trade.

🧨 Result:

Breaking all discipline due to emotions of fear – regret – revenge.

The strategy is correct, but the psychology is wrong → the account evaporates.