Trading psychology, in plain English
The terms that come up in every honest conversation about why traders win and lose. No jargon defined with more jargon.
Trading Psychology
The study and management of the mental and emotional states that drive trading decisions: fear, greed, frustration, overconfidence, and the discipline to act on a plan under pressure. Most traders lose to their psychology long before they lose to their strategy.
Revenge Trading
Re-entering the market to win back a recent loss rather than to take a valid setup. Usually happens minutes after a stop-out, often at larger size, while the stress of the loss is still elevated.
Tilt
A state of emotionally compromised decision-making that persists after a triggering event such as a loss or a missed move. A trader on tilt keeps trading, but frustration is making the decisions. Borrowed from poker.
FOMO
Fear of missing out: entering a trade because price is moving without you, not because your setup appeared. FOMO entries are typically late, oversized, and taken at the worst part of the move.
Overtrading
Taking substantially more trades than your edge justifies, out of boredom, frustration, or the urge to make something happen. Research by Barber and Odean (2000) found the most active retail traders underperformed the market by roughly six percentage points a year.
Discipline
In trading, the measurable degree to which you follow your own pre-defined rules: sizing, entries, stops, loss caps, and no-trade conditions. VEXA scores it daily as part of the CDI Score, computed from real fills rather than self-assessment.
Trading Journal
A record of your trades and the decisions behind them, kept for review. A complete journal captures the setup, the reason, the emotional state, rule compliance, and the outcome in R, then gets reviewed on a schedule. The review, not the writing, is where the value lives.
Playbook
Your documented set of named setups, each with entry criteria, exit criteria, market conditions, and risk rules. A trade that does not match any play in the playbook is, by definition, a guess.
Expectancy
The average amount you can expect to win or lose per trade over many occurrences: (win rate × average win) minus (loss rate × average loss). A positive expectancy setup can still lose for a week; a negative expectancy setup will always lose eventually.
R-Multiple
A trade's result expressed as a multiple of the amount risked. Risk $200 and make $600, that is +3R; lose $200, that is −1R. R-multiples make trades comparable across different sizes and account values, which dollar P&L hides.
Win Rate
The percentage of trades that close profitable. Meaningless in isolation: a 40% win rate with big winners beats a 70% win rate with big losers. Always read next to average win/loss and expectancy.
Profit Factor
Gross profits divided by gross losses over a period. Above 1.0 means the strategy made money; sustained values well above 1 suggest a real edge, at least in the sampled conditions.
Drawdown
The decline from an equity peak to the following trough, in percent or dollars. Maximum drawdown is the deepest such decline on record, and it is the number that decides whether a strategy is survivable, psychologically and financially.
Max Daily Loss
A pre-committed cap on how much you may lose in one session before you stop trading. The single most protective rule in day trading, because it converts a bad day into a bounded event instead of a spiral.
Cooldown
A mandatory pause after a loss or a rule break before any new position. Cooldowns exist because the physiological aftershock of a loss, elevated heart rate and narrowed attention, outlasts the loss itself, and trades taken inside that window skew impulsive.
Position Sizing
Deciding how much to risk on a trade relative to account size and setup quality, before entry. Consistent sizing is what makes statistics like win rate and expectancy meaningful; erratic sizing makes even good stats lie.
MAE / MFE
Maximum Adverse Excursion and Maximum Favorable Excursion: the worst and best price a trade reached while open. MAE tells you whether your stops are placed where trades actually fail; MFE tells you how much move you routinely leave on the table.
Disposition Effect
The documented tendency to sell winners too early and hold losers too long, named by Shefrin and Statman (1985). Odean (1998) found investors realize gains roughly 1.5 times more readily than losses. It is loss aversion expressed as an exit strategy.
Loss Aversion
The finding, central to Kahneman and Tversky's prospect theory, that losses are felt roughly twice as strongly as equivalent gains. In trading it drives moved stops, held losers, and revenge trades: the behaviors that exist to avoid feeling a loss rather than to make money.
CDI Score
VEXA's patent-pending daily score of the trader across three axes: Confidence, Discipline, and Intuition. Computed from imported trades, journal entries, rule compliance, and, with a wearable connected, biometric signals. One number per axis, updated every trading day.
Compliance Score
In VEXA's Rules Tracker, the 0 to 100 daily score of how well a session followed your own rules, graded automatically from real fills. Bands run from Elite (90 and above) down to Reset, with streaks tracked across consecutive clean days.
Biometric Monitoring
Recording physiological signals, most commonly heart rate from a wearable, during trading sessions and pairing them with trade data. Used to make stress states visible: VEXA Sentinel overlays heart rate on the intraday P&L curve and can intervene when stress patterns form.
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