Psychology of Trading
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Izabela Górecka – “Success on the market depends not only on knowledge, but also on emotional stability” [Interview]

Izabela Górecka – “Success on the market depends not only on knowledge, but also on emotional stability” [Interview]

created Paweł MosionekApril 24 2024

Practice makes perfect. But is this really always the case? Can anyone become a trader? We can easily find statements on the Internet and in literature that success in investing depends (and here, depending on the source) from 50% to even 90% on mental preparation and broadly understood psychology. Despite this, many market adepts ignore these issues. Therefore, it is not surprising that the percentage of traders who lose money on the market is not surprising. According to recently published statistics by the Polish Financial Supervision Authority, 73% of Polish traders suffered a loss in 2023. And although this is a much better result than both the mythical 5% of earners/95% of losers, and the statistics from 2022, when 79% lost, it still leaves much to be desired. So where exactly do traders go wrong?

We had the pleasure of talking about psychological aspects of trading with Izabela Górecka, who has been associated with VSA Trader Sp. for years. z o. o. Even though Iza is not a trader, she knows more about the investment process itself than most investors. He is a psychologist and therapist, and at VSA Trader he deals with mental training of traders and prepares them to work in this profession. For several years, he has been conducting research on bioelectric brain activity in the areas of emotions, cognitive processes and the impact of meditation on the human brain. She is also the co-author of the book "Trader Hunter's Mind" and quarterly "Market Practitioner", which debuted in early April 2024.

Izabela Górecka

"Success on the market depends not only on knowledge, but also on emotional stability"

Forex Club: Iza, although you are not a trader yourself, you have been involved with trading for years and you certainly know more about this profession than many professionals. In a few sentences, tell us what exactly you do on a daily basis and what your working day looks like.

Izabela Górecka: On a daily basis, I cooperate with two companies: Vsa Trader and Black Wolves Corp. Both operate in the financial industry, specializing in trading. In addition to being a mental trading trainer, I currently manage a research program and coordinate the work of two teams. This makes my workday very intense. When you asked the question, the first thought that came to my mind was simple:

“From morning to evening I mainly deal with solving problems :).” 

Describing what I do in more detail, I will start by saying that as a mental trainer I monitor the mental state of traders, realizing that success in the market depends not only on knowledge, but also on emotional stability. I work with our traders every day and help them when needed. Together with Adrian Kubowicz, who serves as Supervisor in the company, and in cooperation with the team, we analyze traders' activities, carefully detecting the mistakes they make during the session. We determine whether they are substantive in nature or whether they result from mental problems. The goal is to identify these situations and respond to them before the problem gets worse. Even though our traders base their trading on precise procedures and losses are completely controlled, even experienced traders have difficult days. Additionally, I conduct training on how to skillfully manage emotions on the market for people learning the trade professionra, sharing knowledge and experience through webinars and individual consultations. My task is also to perform full brain mapping using the QEEG method for traders moving from a demo account to a real account, when indicated, after signing an agreement with the fund. Working with traders who operate on short time frames can be very surprising. There are days when nothing happens, but there are also days when you suddenly have to put out the fire because emotions are running high. You might think it's different in a stock trading group, but that's misleading. Even those who seem to have control over their emotions and investment strategy can find themselves in situations that cause their emotions to explode. work as trading psychologist it is not only support in psychological issues, but also the ability to think quickly and act effectively in situations with high levels of stress.

FC: The old saying goes that "practice makes perfect" but I wonder if it applies to trading. It seems to me that even after reading dozens of books or following charts every day for several hours for several or a dozen years, it will not always provide the results we would expect. What's your opinion on the subject?

IG: Saying "practice makes perfect" it actually has applications in many areas of life, including trading. In my experience, however, for this saying to be true, several conditions must be met. If even one of them is not implemented, you can practice for years without visible results.

Firstly, proper knowledge is necessary, both theoretical and practical, which is crucial for effective skill improvement. Second, trading practice should be conscious and intentional, focused on improving specific aspects of your skills, which includes working on weaknesses and using feedback to improve. Developing skills also requires patience and persistence, and often involves overcoming frustration and continuing to practice despite initial setbacks. Without internal motivation and commitment, it is difficult to maintain the regularity and intensity of practice that are needed to achieve mastery. It is also important to maintain a healthy balance between trading and rest to avoid burnout.

Additionally, it is crucial to receive proper feedback, which can be provided by a trainer who indicates what and how to improve. If any of these elements are insufficient, you can practice for years without results, because repeating incorrect knowledge or techniques may lead to the consolidation of bad habits and strategies, which results in trading failures. The risk is that if a trader uses strategies based on incorrect assumptions or ineffective methods, they may perpetuate these incorrect patterns and incur losses. Therefore, the key element is to ensure that the knowledge being practiced is effective, proven and effective.

People working with us have the advantage of having access to constant feedback. Thanks to this, they do not encounter problems with verifying their knowledge or assessing plays, which provides them with additional protection against using ineffective practices.

FC: There are many stories about successful investors available on the Internet, but the document that stuck in my head was titled: "Million Dollar Traders", available among others on Youtube. In short, for people who didn't have the opportunity to watch it: it was a project that took people from different fields and tried to turn them into traders. Ultimately, one of the more successful participants turned out to be a professional soldier. Based on your experience, are you able to select specific professional groups whose chances in trading are greater due to specific predispositions? What qualities does a good trader have?

IG: Documents "Million Dollar Traders" it actually sheds interesting light on the adaptability of different people to the role of a trader in the financial market. From my own experience working with traders, I can say that there is no clear professional group that would guarantee success in trading. Yes, certain character traits and professional experience can make it easier to achieve good results on the stock market, but there is no simple recipe for who will turn out to be an effective investor.

Trading requires a combination of specific skills and predispositions that are not exclusively related to previous professional experience. For example, good results in trading are often achieved by people who demonstrate themselves high level of self-discipline, ability to make quick decisions in a rapidly changing environment, high resistance to stress, we write more about it in our book "Trader - Hunter's Mind". All these features can be found in various professional groups and can also be trained. It is important to understand that trading is not only about technical knowledge, but also about constant work on your own emotions and strategies. Additionally, however, you should remember that  not everyone is predisposed to learn the difficult technical knowledge required in trading, just as not everyone is able to work every day under great pressure, which is an inherent element of this profession. This may be comparable to competitions such as  athlete, surgeon or soldier, where specific features and skills are also required, and not everyone is suitable for performing them.

In the context of trading as a "free profession"  There are no formal recruitment tests, as in many other professions, but the financial market relentlessly verifies the skills and mental toughness of traders. Ultimately, it is individual characteristics, the ability to learn and adapt, as well as constant work on oneself that determine whether someone will be a successful trader. All this makes trading a field open to many, but not everyone can succeed in it and, unfortunately, most fail.

FC: Exactly, referring to the word "failure". In your experience, why do traders lose most often? What is the most common cause? And why do they not do anything about it, or do not do what they should, and in the end they still lose?

IG: In the world of trading, both beginners and experienced investors often encounter difficulties that lead to financial losses. The reasons for these losses can vary, but in my experience there are a few key mistakes that traders make most often. Lack of appropriate knowledge and preparation: Many traders enter the market without proper preparation and understanding of how financial markets work. Lack of education and understanding of market mechanisms leads to wrong investment decisions. psychology: Emotions like fear and greed have a huge impact on trading decisions. Traders often allow emotions to guide their actions, which leads them to prematurely exit profitable positions (out of fear of losing the profit) or hold losing positions in the hope that the price will reverse. Risk management: Inadequate risk management is one of the key reasons why traders lose money. No setting stop losses, too large positions in relation to the capital usually result in large losses. Failure to follow a trading plan: traders often create trading plans, but under the influence of emotions or  sudden market changes, they deviate from established strategies or their plans are too excessive for their funds or knowledge of a given market instrument. Lack of consistency in following the plan can lead to unpredictable and often unfavorable results. Overconfidence: After a series of successful trades, traders can become overconfident, leading to ignoring warning signs and taking excessive risks.

FC: All these elements seem quite obvious to me and immediately a thought comes to my mind: why do traders do nothing about it, or do not do what they should, and end up still losing money?

IG: The reasons may be different, for example lack of self-awareness: Some traders are not aware of their mistakes or do not admit to them. Then resistance to change: changing your approach takes time, effort and often humility, which not everyone comes easily to. Bad habits: changing habits, especially deeply rooted ones, is difficult and requires a systematic approach and patience. Traders who do not learn from their mistakes and work on their weaknesses often continue the cycle of losses. The key to success in trading is continuous education, following a rigorous plan, and managing emotions and capital.

FC: The next question concerns brain activity research. You have a lot of experience in this field. Even more intriguingly, your research focused on the brains of traders, which I'll get to in a moment. But the process itself sounds incredibly interesting. Tell me more about this.

IG: Testing brain activity using QEEG mapping (Quantitative Electroencephalography) is indeed fascinating, especially in the context of assessing professional skills and predispositions, such as trading. QEEG allows for the analysis of brain waves, which can provide valuable information about various aspects of the functioning of a trader's brain. Thanks to this, it is possible to identify the strengths and weaknesses of the examined person in terms of skills such as concentration, attention, speed of information processing or cognitive flexibility.

In the context of trading on the stock exchange, the ability to quickly analyze the situation, make decisions under pressure or manage emotions may be crucial, which can also be assessed using QEEG. Brain mapping, for example, may indicate higher activity in areas responsible for risk processing and decision-making, which are crucial for traders.

FC: What conclusions can be reached after such an analysis in the context of trading? Based on the test results, can you tell whether someone is a good trader material or not?

IG: It's important to remember that while such studies provide important data about brain function, they are not sufficient to say with certainty whether someone will be a good trader. Success in trading depends on many factors, including experience, market knowledge, ability to adapt to changing market conditions, as well as personal qualities such as discipline and stress resistance.

Therefore, although QEEG testing can provide valuable clues regarding potential predispositions to be an effective trader, it should always be interpreted in the broader psychological and professional context of the individual.

Additionally, it is worth mentioning the possibilities offered by biofeedback in the context of working on weaknesses detected during the QEEG examination. Biofeedback is a training method that allows individuals to train themselves to control their own physiological processes, such as brain wave activity, in order to improve specific mental and cognitive skills.

For example, if QEEG brain mapping identified problems with concentration or attention, biofeedback can be used to work on increasing beta wave activity, which is associated with better attention and alertness. Similarly, biofeedback training can help regulate alpha and theta waves, which can promote relaxation and better stress management - key skills for traders.

The use of biofeedback combined with the results of QEEG research can therefore significantly contribute to personal development, improved performance and optimization of decision-making processes, which is extremely valuable in many professional fields, including trading. As we know Biofeedback is also widely used in sports, where many top athletes use this method to raise their mental preparation for competitions to a higher level.

FC: Finally, a question about the new project that you co-authored – "Market Practitioner". It's a free quarterly, the first issue of which has just debuted, and I've just finished reading it - trading curiosities, descriptions of market moves, meditation... A good start. How did this idea come about and what are your plans for future releases?

IG: The idea for "Market Practitioner" was born from the need to gather in one place reliable and detailed information on market volume analysis, based on the VSA methodology (Volume Spread Analysis). We have noticed that traders, both beginners and advanced, are looking for reliable sources to help them better understand price mechanics and verify information that is often misleading or incomplete. The inspiration was the desire to provide a tool that not only educates, but also integrates the trader community around common projects and initiatives.

We publish "Market Practitioner" quarterly, which allows us to carefully prepare each issue so that the content is up-to-date and adapted to current market events and the needs of our readers. Our passion for financial markets and willingness to share knowledge are key to us. Each issue is a combination of trading curiosities, practical descriptions of performed market moves, as well as educational articles that can be used both for learning and inspiration.

We have also engaged our business partners and specialists from various fields to ensure that each issue is rich in professional analyzes and comments that help readers build solid foundations for their trading. We plan that subsequent issues will continue the mission of educating and integrating the trading community that uses volume in its decision-making process, while maintaining a high level of reliability of the information provided, which is most important to us.

By making the magazine free of charge, we want to provide wide access to knowledge, which we believe will contribute to raising the general level of economic and financial awareness in our society.

FC: Thank you for the conversation!

Market Practitioner – Download for free

market practices

izabela gorecka photo

Izabela Górecka

Director of research on Mental Projects in Black Wolves Corporation. Psychologist, mental trading trainer at VSA TRADER Sp. z o. o., specialist in QEEG tests, biofeedback therapist. She graduated with honors in Psychology from the University of Lower Silesia, DWS. A graduate of the Faculty of Sociology at the University of Warsaw and the Advertising and Marketing Department. Co-author of the book "Trader Mind Hunters". Author of articles, among others, for the magazine "Psychologia w Praktyce". Member Polish Association of Biofeedback Therapists and Trainers. He conducts research on bioelectric brain activity in the areas of emotions, cognitive processes and the impact of meditation on the human brain. In his professional work, he uses innovative hypnosis techniques with the support of electroencephalography. This method makes it possible to monitor the condition of the examined person, and the observation of brain wave activity helps to precisely determine whether the person has achieved the required condition to perform hypnotic induction. It trains and mentally prepares future traders to work in this profession.

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.