Tharp discovered that trader's psychology make up of mind has more to do with his success than anything else does.

However, what exactly is psychology of mind?

In short, psychology of mind refers to your thinking and emotional actions and responses to any given situation...In trading, fear, greed, vanity, pride, hope, jealousy, denial - all these can affect investment decisions. Although, your aim in market is to maximize your profit and minimize your risk, thinking and emotions often make this easier said than done.

FOR EXAMPLE - Traders, who cannot control psychological process of thought and emotion, make wrong decision - such as common amateur mistake of holding a losing position in belief that someday it will become a winner.

Loss aversion is a classic mistake. By nature, humans value a loss. Therefore, you suffer almost twice as much pain losing $1 as you would in gaining $1. Loss aversion compels most traders to hold a losing stock while it plummets downward. This clouded judgment clearly contradicts trading adage: cut your losses and let your profits run.

Emotional investors hold losing positions because they view paper losses differently from realized losses. An investor also engages in other forms of irrational behavior.

EXAMPLES are attributing success as natural and losses to bad luck.

This is just tip of iceberg. When talking about other devastating effects of trading, if you do not have psychology of your thought and emotions in proper prospective consequences can be devastating.

This is what opens up problems for new traders, and then they lose manage money very quickly in markets. Most people completely wiped out their finances within first year of trading. So, as you can see, your thinking and emotions play a big part in determining whether you fail or succeed, but did you know that thought and emotion make up two different spheres pertaining to trading success?

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