Tips for Controlling Trading Psychology by Norman Welz

Ignoring trading psychology can lead you to unpleasant losing streaks. Here are some tips by Norman Welz for controlling your emotions when trading.

Norman Welz is a trader, trading coach, and writer with a focus on trading psychology. In 2012, he wrote a German book called Tradingpsychologie that sparked a conversation on how psychology is used when making market decisions. He explained that instead of relying solely on technical aspects like patterns and graphics, a trader should also train their brain and learn to control their emotions to their advantage.

Generally speaking, trading psychology refers to the state of emotion that helps determine the success or failure of trading assets. According to Norman Welz, the key tips to control trading psychology are to train your brain and build a strong trading mindset. So, instead of only focusing on trading strategy and technical aspects only, it's also crucial to train trading psychology and learn to control emotions when trading.

Here's the complete guide to learn more about the Welz approach.

Develop a Trading Mindset

In his book, Welz states that trading could bring out many intense emotions that reflect traders' personalities. As he points out, each trader has a unique set of contextual influences from various sources like family, friends, consumed media, innate personality, and socioeconomic background that may affect how they control their trades.

According to Welz, when we start trading, all of those influences tend to become one in our minds and determine how our brains work. This is what often makes it difficult to focus just on the trades and ignore the rest. If left unchecked, this could lead to losing trades.

The solution to this is to build a trading mindset that can keep the influences at bay. Such a mindset can be developed, trained, and adapted into a trading strategy. You can also analyze and change it over time to make it a more profitable approach for your trades.

Implementing the Welz Approach

The Welz approach mainly stresses the necessity of having a good trading mindset. Welz states that every person has a mental bridge that needs to be crossed to achieve success. This is why traders need to acquire a special skill that combines market knowledge with the right mental ability.

As mentioned before, the problem is that many traders tend to only focus on theories and technical aspects such as trading strategies, chart patterns, mathematical calculations, etc. While in reality, it is their emotions that will play a major role in the application of such techniques. This is not to say that trading knowledge isn't important, it's just that they're often overtaken by the wrong mentality and behavior.

Welz firmly believes that anyone can be a successful trader once they got rid of their fears. Unless they're clinically ill, anyone can overcome their anxiety if they are willing to work on that. So, it isn't something that's given but rather developed through practice.

If you're unsure where to start, Welz suggests consulting an expert in this field. You can reach out to consulting agencies, trading mentors, or participate in online discussion forums.

How Important is Psychology in Trading?

It is undeniable that many people still look down on trading psychology. But that's simply because they're unaware of how trading psychology can actually affect your trading outcome. Welz stated that since most traders are men, they tend to think that psychology is not that important. Instead, they put more emphasis on rationality, knowledge, and experience.

Meanwhile, Welz believes that all of those things won't matter if the brain is not trained correctly. In fact, he stated that about 95% of our actions are subconscious and that we tend to copy the same behavior over and over again. If this happens too often, we might repeat the wrong action and end up in an unprofitable loop.

To support his argument, Welz mentions a study in which 120 traders were presented with a system that has proven its intrinsic value. After a year of testing, apparently, 119 of these traders failed even with the system because of their untrained mentality. This shows that a good strategy alone is not enough to generate profit. One should also have a good mentality and a strong trading mindset.

Bottom Line

For many years, Norman Welz has been helping people overcome their fears and difficulties, even leading them to secure Olympic victory. As a trading coach, he has also helped traders reach their goals by activating their mental energies.

To develop a winning trading mentality, you must train your brain to not make a decision based on impulsiveness or pure emotions. However, ignoring it altogether is also not a good idea according to Welz. Instead, you want to use your market knowledge and technical tools while also recognizing the role of human sentiment in financial markets.

Just keep in mind that there is no shortcut to developing a successful trading mindset. Being a trader is never easy. You need to make split-second decisions and take multiple high-risk chances almost in every trade. But even so, you can take steps to build a powerful mindset and begin leaving your fear and old habits behind.

Ignoring trading psychology for a long time could cause serious problems like trading burnout. Such a condition can lower your productivity and make you feel depressed all the time. This is why as a trader, it's important to know all the signs and how to overcome trading burnout.