Did you know that in order to be successful trader you need to have your emotional and mental state like robot – sort of. It is important as the knowledge itself with expirience and skills, this all determines if you are going to be a success or failure. Two most important aspects when it comes to trading is discipline and taking risks. But when it comes to psychology, emotions come in play such as fear, greed, regret and hope.
WHAT YOU WILL LEARN HERE:
- What is trading psychology?
- Understanding of emotions in trading
- Skills you need to master
- Skills you need to avoid
Please do not shoot yourself as the picture is referring too but some people get really frustrated that is why you have to better understand emotions. we will take a closer look at the ones that are connected directly with trading.
GREED. We all are greedy to some point, meaning we want wealth. When it comes to trading it results in such way that traders stay in a profitable trade since they want to squezze as much as possible and at the end the trade turns against them which results in a loss.
FEAR. Then we have this emotion which blocks us from taking risks if we have made mistakes in the past or we close the trade before. When you are in the fear zone you will most likely panic and that does not help you in any way because you will make most mistakes here.
REGRET. Usually it happens when you miss your start on a trade and you do it at later point but this is something that you defnitely need to have in order if you want to make profits. You have to be disciplined.
SKILLS YOU NEED TO MASTER
You may think now when you are reading this, why is this so important. It is because we act differently when we involve our own money into something. We do not want to lose and therefore emotions come in play. You have to master few rules for yourself in order to work normally.
DISCIPLINE. When you will have this mastered you will take emotions away from trading and will not affect your trading strategy. That means, you have a strategy before entering a trade, when you go out if it is a profitable trade and what to do if it does not go the way you want. You need to do this because before you start a trade, your choices are better since there is no emtion involved and you are in sort of neutral mode. After you put in a trade, we are in adrenaline mode where everything comes to your mind, from losing to profiting. Follow your plan and strategy to the point and you will be good.
PATIENCE. You think this is easy one but it is not. When you get a feeling that you can make money with a click of a button you will start seeing how important this is. You have to wait for appropriate setup to put a trade in. So wait for your strategy to fall in place as you plan not predict and then put a trade. On the other hand we also have patience that you need to have in mind, which is that you will not become a millionare over night. But if you keep profiting on daily, monthly basis and so on, guess what? You are on the right path to become one. Do not make mistakes otherwise market will give you a trading lesson of his own.
PEACE OF MIND. No, you do not need to start training yoga every day. It means that when you make a loss, you have to accept it and move on since it is part of trading and no one in this world is 100% trader. prepare yourself, for best and worst.
SKILLS YOU HAVE TO AVOID
You have to avoid these emotions but also accept them otherwise they will strike you at once! Accept but act by plan as we said and profit.
FEAR. We have already covered this one since it is really important. You have to learn to control it because it can destroy even the best strategy you have if you will act upon this emotion. If you fear to lose money maybe you should first take a step back and start slowly so you become comfortable with trading.
FRUSTRATION. This is something that is well connected with fear itself. For example, you se that if you would follow your strategy you would made 5 profitable trades in the past days but you were too scared to put a trade. Now you just jump into the market to make back the profits that you potentially did not make and again, ignore the rules to the point . We know where this leads you.
As you see emtions play big role in trading and there is very thin line beetwen one and another. Therefore there is no real recipe when it comes to this and controlling your emotions to become superstar trader. To become that, you actually have to go inside yourseld and find that inner will and balance. After all, if you do not do it, you will learn it the hard way but you will learn it either way.
To conclude all this, i would say that successful traders have in common next:
- Know where is their personal and account limit
- They have risk management setup
- Dscipline in order every time possible