Key TAKEAWAYS
Key TAKEAWAYS
A successful trader does have a certain set of skills other than technical ones that help them to stand out in the crowd. Technical skills like the knowledge of market fundamentals and trend analysis are important to have a clear understanding of the subject but mindset can overrun each of your skills. Therefore, it becomes inevitable to be in the right mindset to be successful.
Getting the right mental makeover is not an easy task and not many traders manage to have it. However, certain traits like emotion-containing, quick decision making, and exercising trading discipline can be inculcated in an individual to move towards the right mindset. These are the components that are responsible for maintaining healthy trading psychology.
Our Take
Traders need to keep themselves updated on the market changes. In addition to making one’s mental capabilities strong, it is essential to manage ones’ emotional states like greed and fear that can lead to unavoidable losses. Creating one’s mind in the right manner by containing the requisite emotions and strengthening it with the right intellect are the key factors that determine a traders’ success rate.
FEAR
The bad news about a certain company and stock and make a trader fearful and that’s the point the underlying psychology of a fearful trader reflects in their transactions that they make in the market. Sometimes, the overreaction of fear leads the trader to liquidate all of their stocks and they miss some potential chances of gain.
It’s a factor of utmost importance for a trader to understand and work on. While fear remains a natural phenomenon in the psychology of an individual, it is a certain threat to the profit potential of a trader.
Understanding one’s fear beforehand is important. What factors make them fear and how they react in a fearful scenario should be analyzed clearly by a trader and potential responses can be outlined. This can help them to make rational decisions when such a scenario arises and emotional responses can be avoided.
GREED
An old saying in Wall Street says, “Pigs set slaughtered”. The proverb targets the greedy traders that hold a certain position imagining to take out the last penny from a given position. What they forget is that the scenarios can change and their greed can cause them losses.
Overcoming greed is not an easy task but remains an essential one. When decisionmaking is driven by greed and technical and analytical studies of a stock, there are high chances that it can cause loss to the trader and it does on many occasions.
SET RULES!
In the crucial hours of psychological crunch, traders are ought to follow a predetermined set of rules. To ensure the implementation of the right strategy in the hours of need, a trader needs to set guidelines on risk-reward tolerance to decide on when to enter and exit the market so that emotions can be kept out from the game.
Apart from this, you need to decide on certain events that can be negative or positive and can trigger a buying or selling decision.
A wise trader sets limits on the amount that they are willing to lose or win and are therefore prepared for either achieving the profit margin or coming back the next day after a setback.
RESEARCH & REVIEW
Successful traders are experts in their working field because of the time they invest in researching and reviewing the market. It means studying charts, reading journals and market analysis is an essential ingredient that is responsible for creating a successful trader. Keeping the track of news events, macroeconomic analysis, and reading trade journals to feed one’s mind is as important as exercising the day trading.
Trading psychology refers to the mental state of a trader during the time they spend in the market. It’s one thing that can determine the success and failure of a trader in the financial market.
Getting the right mental makeover is not an easy task and not many traders manage to have it. However, certain traits like emotion-containing, quick decision making, and exercising trading discipline can be inculcated in an individual to move towards the right mindset.
Developing an effective trading brain involves a personality modification and people who don’t bother to attempt this shouldn’t go for trading
