What is business psychology?

Business psychology is the change in mindset, emotion and perception, and therefore behavior, when conducting active and “live” trades, as opposed to demonstrations. Trading your own money or managing other people’s investments adds a psychological element and an additional barrier to success that cannot be duplicated in the classroom. Emotions, such as indecision, fear and greed, that do not normally come into play during the training process, arise when one begins to trade with real money. These emotions are the result of not just the use of real money, but the highly stressful and competitive environment of the daily trading floor. Learning to identify and manage these psychological elements will allow you to keep a clearer head and make better business decisions.

Because it is important?

During training, it is quite easy to take the risk of putting money in a company or a fund. It’s a bit like playing Monopoly, you make decisions with fake money that are much more difficult to make when real money is at stake. Easy decisions in training can easily start to seem like rocket science to the new operator. Indecision or hasty decision making can result from being nervous as a result of stress and the reality of the trading floor. These poor decisions can lead to missing a good business opportunity or going “all in” before you have had enough time to think it over.

Besides indecision, fear and greed are the biggest psychological barriers to good trading. These emotions can quickly and negatively affect your ability to make well-thought-out, quality business decisions. Fear can cause an inability to make a move or remain patient until a trade reaches its most profitable level. Greed can cause you to make risky business decisions to get that “big hit” and lose a lot of money quickly.

What can I do to maintain a positive business psychology?

It is important to reduce your stress levels and control your emotions while trading. This can be really difficult amid the pressure of rapidly changing business situations that you need to react to quickly. One of the best things you can do to stay calm is to create a trading plan that has different contingencies for various possible market changes and stick to your plan. By creating an action plan with a calm mindset, you can avoid the negative ramifications of making a hasty decision that you don’t have time to think about properly. Focus on educating yourself and staying up-to-date with the most effective trading strategies. You must develop the ability to be more flexible in your planning, without losing sight of responsible risk management. Having this solid plan that takes into account several different possibilities gives you the ability to make decisions on the floor without allowing your emotions to control your choices.

While it may seem that psychological concepts would not come into play when talking about trading, psychology is us and it is everywhere. Having an understanding of the psychology of trading and how best to manage your emotions and the psychological dangers that can negatively affect your ability to trade well will improve the quality of your trading decisions. Learning to manage the psychology of trading is an integral part of the successful trader, as you can be his greatest asset, as well as his worst enemy.