Confidence is such an important aspect in trading overall for traders learning the skill of trading. It helps a trader by eliminating and reducing fear when considering a trade in the market, while also allowing us as traders to hold trades longer for more profits and potential reward or to cut losses when needed as well ( relating to following a trading plan and management process ).
In the video below and this articles topic I go over 3 ways a trader can help increase confidence and follow their trading plan during certain times, when normally they would possibly experience fear or worry.
The number one aspect is following a high probability strategy or methodology, not a strategy that is experimental, instead a strategy that focuses on the core market dynamic processes. The reason for this is that the core market dynamic processes are the proven major driving forces of the market. Some key examples of core market dynamic aspects includes Major Structure aspects, Trend Evidence aspects, reading Candlesticks and Fibonacci confluences.
The second way I would like to highlight is spending time in the learning phase of trading back-testing and getting a feel for how a particular strategy ( or strategies ) works long term. This can be done for free by pulling the charts back on MT4 or similar and clicking F12 key to go candle by candle or can be done using a simulation testing program such as Forex Tester 2 ( recommended back-testing tool ).
Above – Video on Building Confidence in Trading
The third aspect or way of building confidence for a trader is by starting your trading on a demo account. What this does is eliminate the fear aspect while learning trading and following a trading plan as a skill and then when a trader is more confident and a trader has tripled or quadrupled a demo account, then a trader can consider going to live from demo. As another option, if a trader wants to risk real money when learning, then a trader can start with a micro trading account and build their confidence from there.
What the 3rd aspect does, is it takes away the psychological aspect of risking real money until a trader is fully ready and skilled in this business.
Overall, confidence building in trading for a newer trader comes down to 3 important processes, having a good strategy, back-testing that method and getting an understanding of the market before going live or risking real money.