Psychology of Oil Trading Market
The reason why 90% of oil traders lose can be summed up with 2 words:
Oil Trading Psychology
Many people fail on the oil trading psychology front and only a few take the time to transform their mindset. The reason why most people make losses is not that they cannot beat the crude oil market, but because they do not have the right mindset. Oil Trading psychology is all about transforming your mindset.
In Oil Trading, you must first master your method and then put in many hours of learning how the crude oil market works.
The oil market is too complex and there are many factors that have a huge impact on the daily fluctuation of oil prices. Oil traders should understand how the online oil market works through studying oil trend characteristics and also how these fluctuations take place.
Psychology and Emotions
When it comes to the crude oil market, winning is a matter of the mind. Studying the psychology of the crude oil market takes into account what influences others - including the mass psychology of the people that trade oil on a daily basis. Anything involving winning or losing large sums of money becomes emotionally charged. Winning depends on knowing your own mind and also understanding how mass psychology moves the oil prices.
In most cases when traders invest in oil, they invest more than just money - they make an emotional investment. This is where most go wrong; being right becomes more important than making money. When the transaction goes wrong since they have already made an emotional investment they let their decisions to be ruled by their emotions and they hold on to their losing transactions in the hope that it will bounce back. Unfortunately their losses become greater and they find it even more difficult to close their oil orders.
Even when traders make money and let their emotions get in the way, they either become greedy or over-trade.
Oil Trading psychology will form a good foundation for trading profitably - it's about learning how to keep emotions out of the picture, and not to letting these emotions control your oil trading transaction decisions - trader behavior changes very little with time, as humans will always make the same mistakes over & over again.
You can learn how to control the 3 most dangerous emotions that tend to cloud judgment & cost you profits. These 3 emotions include:
- Greed
- Fear
- Hope
Six Tips For Transforming Your Mindset
1. Define your goal.
There are many important Oil Trading questions that you need to answer before jumping into the oil market. Creating and defining agoal will give you a start point to your success.
2. Keep it simple.
Some people use more than 5 indicators on one chart analyze & to inform them of their next move with no success or even breaking even. Thing is that more indicators don't equal more accuracy.
The Three most powerful tools to use are:
- Candlesticks (buyer & sellers behavior),
- Oil Trading Price action (such as support & resistances), and
- Oil Trading Trendline (up, sideways or down).
3. Do not get emotional.
If you're attaching emotions to your crude oil trades because there is real cash involved you need to change your mindset & begin following your plan. If you're a beginner with no previous experience always begin with training and learn until you start making profits on you Oil Trading demo crude oil trading account before investing your capital.
4. Nothing wrong with breaking even.
Not all your trades are going to be winners. It is better to break even than to lose. If you know that a transaction has turned against you don't start praying for a miracle hoping for the crude oil price oil trend to reverse instead cut your loss and move on. There are endless profitable opportunities.
5. Speculation is your worst enemy.
Don't speculate on where crude oil price maybe heading. Always use your oil charts and your plan and study the oil trend before opening a transaction. The oil trend is your friend, so make good use of it by following the crude oil price charts.
6. Don't allow your winning orders to turn against you.
If you have an open winning transaction at hand don't allow it to turn against you. It is better to place a stop 5 pips above the entry opening point and break even/or win little than to let it turn into a loss.
For how to utilize these tips look at the Oil Trading plan guide: the section about this is shown below.
Psychology Section on Oil Trading Plan
