What Is Awareness and How Can It Help You in Trading?

In this article, we will take a closer look at some important trading psychology issues that our performance coaches talk about in their trading psychology course. This course is part of the FTMO Academy and is available free of charge to our registered clients.

What Is Awareness?

Simply put, awareness is a state of mind in which we are aware of something and able to perceive and recognize things and events around us. This enables us to react correctly to those events, and without awareness, we would be practically unable to survive in this world at all. An interesting fact is that we may not be aware of some things around us even though we see or hear them.

This is where a special type of awareness comes into play, namely self-awareness. Self-awareness consists of three segments: emotion, thought, and behavior, and it is the ability to be aware of oneself. Without self-awareness, we would be living somewhat on autopilot because we would be repeating the same activities and having the same habits without being aware of them.

Awareness and Trading

Just like in life, in trading, we may do things we are not aware of. And when we look at our journal, we wonder how we could have executed the trade. A great example is a trader who signed up for a session with a psychologist because he had stopped doing well in recent weeks. This was despite the fact that he had been using the same strategy for a long time, trading the same patterns, and had the same risk management.

But he finally admitted that he had moved a few weeks ago and the new house did not have the same conditions as the old one, where he had more monitors, notes with rules or quotes written down. In the new house, he traded on a laptop in the kitchen. In short, he was so focused on the move and the trading itself that he forgot the importance of a proper trading environment in which to thrive. He did not realize that something had changed. And it is this self-awareness that should be the first step to success and growth. If we don't realize what is important, it is impossible to even begin. Many people underestimate this step, but it is very important for our own development. Self-awareness, or self-knowledge, is such a valuable source of information and can serve as a guide for where to start.

Observe Yourself

To understand ourselves and our results, it is first important to understand our thoughts, feelings, and behaviors. Before trading, it is a good idea to think about how we feel, whether we are at ease, and what emotional state we are in. For example, it is good to be aware if there is anything that affects our thinking and mood, if we are focused or tired, what we are thinking about, if we are upset about something, etc. Once we figure this out, we need to think about where the mood or thought is coming from and what causes it. If we find ourselves thinking about something other than what we are doing, it is impossible to be successful.

Trading Process

As with any other activity, in trading, we need to be aware of what we are doing if we want to achieve good results. Otherwise, we cannot expect good results in the long term.

Before every deal, we need to sort out our thoughts, feelings, and expectations. When a trade is open, it is beneficial to observe what triggers us to, for example, exit the trade at the Stop Loss or when the price approaches the Take Profit and turns into a loss again. What thoughts, feelings, or behavioral changes does this trigger in us, and what are our emotions in the case of a losing trade and also in the case of a profitable trade?

The Importance of Keeping a Proper Journal

Afterwards, it is very important to record all these findings in a trading journal. Without a thorough record of all the thoughts, feelings, and influences that each trade had on us, it is impossible to revise our trading. Our mind simply cannot remember all this information.

A properly kept journal keeps all this information, and thanks to it we are then able to find out where we have made mistakes or discover bad behavior patterns and habits that we would never have noticed otherwise. It also helps to organize our thoughts and better understand our actions in general, because there is a difference between thinking about something, writing it down, or saying it out loud.

Keeping a journal is one of the best tools we have to increase our awareness. And that's why awareness combined with a well-kept journal is so important in achieving consistently good results. Trade safely!