Is trading psychology just a hoax, or is it a valid and necessary part of successful trading?  Some think that perhaps yes. "It is certainly used more often to explain one's failure than helping one to become successful. One needs an Exorcist to remove the demons of fear and greed." is how one trader expressed feeling about the matter.

When you consider the primary activity of trading is the decision-making process which takes place mentally, trading psychology must be essential to successful performance.   Is it possible though, that a person could feel that it is inadequate or not truly a part of successful trading not because it has no place or is invalid, but that that trading psychology has more than one distinct aspect,? This is more likely to be true than the notion that psychology has no place, that you are either a skilled trader or you aren't.  An enlightened perspective is that when you are highly skilled, it means you've mastered all aspects of it, including the psychological aspect.

Upon closer consideration and after numerous conversations with traders, and with the understanding that trading is a mental, performance activity, one finds that the psychology of trading consists of four different aspects, which are quite distinct and significant in their impact.

1. There is first and foremost the competence factor.  In any performance activity, you have to develop skill at the task itself. This is essential. Until a person establishes competence and thus confidence, the activity will be filled stressful and with emotional challenges.

2. There's also the personal matters of your own self-image and beliefs about money, deservingness of success, etc. These are personal psychological matters which will come into play in trading, regardless of proficiency.

3. Then you also have the factors of simple emotional response patterns established in the early months on one's trading career. Those patterns are related to trading, but not specific to personal issues nor competence.

4.  One aspect of trading psychology not mentioned above, is that of making sure that you are properly equipped with tools, methods and practices that lend themselves to good trading.

An example would be a person's trading system. A trading system may be based on sound reasoning and a good selection of rules, charts and indicators, but if it is not documented or if it is documented poorly, it will be difficult to follow, and thus execute consistently.

It's similar trying to golf with cheap clubs or hit with a lousy bat. Everything else can be in place, but results will suffer - and often mistakenly attributed to 'psychology', one's method or one's self.

It has been witnessed with dozens of traders where once they fix the functional issues with their documentation, other issues just go away. Everyone seems to take for granted how to properly document a trading system, but there are right and wrong ways to go about it, and it does have an impact.

A simple 3-step process for documenting a trading system correctly based on Quality principles and good business practices can be found at http://tradingsystemmastery.com/simplifier/ where you are free to share your thoughts.