A person thinks and acts unconsciously about 96% of the time. Yet we are convinced that we are permanently in control of our actions, which is unfortunately not the case. Our thoughts, decisions, and actions are mainly guided by our past experiences. We often ask ourselves, "Why is it like this?" or "Why is he doing this?" when it would be more useful to ask ourselves, "What is my share of responsibility for what is happening?" Stock trading is a very good illustration of how human thought and behavior work. For me, questioning the stock markets is a form of personal development. When we trade the markets, it is difficult to deal with the fact that our expectations do not always come true. This can be a source of stress and anxiety for traders. A lack of patience and humility, as well as the desire to always make more gains, are very common behaviors. The greatest difficulty is accepting events as they are. Those who accept things as they are live happier and more successful lives, especially when it comes to stock trading.

There are certain psychological aspects that must be taken into account when understanding the stock market.

Those who think they instantly know why a stock increases or decreases in value don't understand the stock market! When trading, you should never be overconfident or think you know enough to win every time. Losses are an integral part of the business, so you need to know how to manage your fear of losing. Fear is a fundamental and central concept in trading on the stock markets. However, humans, by nature, dislike fear and will seek to avoid it. This is why it is difficult to make money trading over the long term. Around 80% of traders don't set stop orders to cut their potential losses. Yet, this is how they lose significant amounts of money that will be difficult to regain. They refuse to cut their losses because they invested with the aim of making their capital grow. So they wait for their positions to recover, and sometimes this reversal never happens.

What skills do you need to trade well?

To become a successful trader, you must learn to control your emotions and thoughts. You must have a trading plan and methodology and stick to it without letting your beliefs and interpretations interfere with it. You must constantly ensure that your actions are under control and that your initial strategy is maintained.

Both are essential. You need to understand market events in depth and not just interpret the rise or fall of a price after the fact. The evolution of curves and the technical analysis terms used to interpret them are like a language. You need to speak this language to understand its uses and motivations, but that's not all. During my coaching sessions, I often observe people who read a book on trading and then think they know everything. It's as if you read a book on airplane piloting at the library and then thought you could fly a plane! It's common to think that once you understand something, you can immediately put it into practice. But knowledge and practice are two very different things. When it comes to dieting, for example, even though there are many diet manuals, many overweight people are unable to lose weight. Knowledge, therefore, does not automatically mean power. I often have clients who have a very good trading plan but are unable to implement it due to their poorly controlled emotions. Ultimately, many fail due to psychological weakness.

Interview with Norman Welz, expert in psychology applied to trading and author of the book “Trading Psychology”.