CFD Trading has become a popular trading choice among many investors because of its leverage that enhances returns (or losses). In the high-pressure environment of CFD trading, it’s important to know that success in CFD trading is based on more than just forex trading app of the data or knowing which direction the market is moving.

The essence of trading is mastering one challenging but crucial aspect – your brain and trading psychology. Many traders spend hours learning about charts and trading strategies, but the most important battle for profitability in CFD trading rests with the psychology of trading. Emotions such as fear, greed, and overconfidence can take a profitable trading strategy and change it to a painful loss with one misplaced trade.

A human brain, designed to support the abilities for survival in a physical world, cannot deal with the abstract world of financial markets. Our brain and human neural pathways will run to stick up for our self-preservation mode. 

Additionally, the short-term movements of financial markets will also trigger our brain into fight-or-flight mode, similar to a shark attacked by another shark, right before it's about to die. However, we must be aware that when we look at the volatility of financial markets, we have not heard bomb blasts that are so close that it is threatening our physical existence.

Recognizing these psychological traps is your first line of defence against self-sabotage. Each trap is linked to the others. All of them together have the potential to give you the tools to allay the destruction of your trading capital quickly.

1. Develop an Iron-Clad Trading Plan

Your trading plan will be your psychological anchor in turbulent trading conditions. A proper trading plan should outline specific entry/exit criteria, risk management rules and well-defined "if-then" scenarios to cover all possible market situations. The plan totally eliminates emotional decision-making because you have already determined what to do and how to react. 

Tip: Write your trading plan when you and the markets are closed and you are emotionally neutral. Review your plan weekly, but never change it during a trading session when emotions may run high.

2. Master Risk Management as Your Financial Shield

Like everything else, proper risk management does not only protect your capital, it protects your psychology. When you are psychologically able to state your maximum risk on each trade, fear will be removed from your decision-making.

3. Keep a Trading Journal: Your Personal Performance Coach

A trading journal turns random experiences into systematic learning. Capture everything about a trade in your diary including not just trade data but your emotional state, market conditions, and what lead to your decisions. This creates objective feedback loops that can help increase your psychological development.

Tip:Separate from just trading, rate your emotional state before and after each trade from 1-10; look for patterns where you score high on emotional assessments and had poor trading performance.

4. Practice Mindfulness: Your Mental Reset Button

Mindfulness connects the signals in the forex trading platforms to your actions in a very important space. Only you have the ability to press pause on your actions in the moment when triggered by market stimuli. Even simple breathing can engage your prefrontal cortex and eliminate the survival panic response of the amygdala.

Tip:Whenever you open a position please perform the following before you click the trade button: 

Deeply inhale a minimum of three times and then ask yourself the following: "Is this trade decision based on analysis or emotion?" If your answer is not immediate YES Analysis; DO NOT TRADE.

5. Implement Cool-Off Periods

Mandatory breaks after losing trades, or emotional trades, eliminate opportunity for revenge trading. The breaks provide time for stress hormones to return to normal, and for rational thinking to resume.

Tip : Create a rule: One day after any trade that includes strong emotions (good or bad), have at least a 30 minute break before you decide on your next position.