The psychology of stock trading is very important to get to know and understand since it can greatly help you to become the best trader that you can possibly be. As a result, it can help to bring about trading success by helping you to become a profitable and consistent trader for the long term.
Important as it may be, this area of trading can sometimes get easily overlooked, especially by newer traders.
The Psychology Of Stock Trading Can Help You With
- Discovering the nature and essence of your trading personality
- Becoming more confident and consistent with making your own trading decisions
- Understanding the emotions that traders can experience such as with fear, geed and anxiety
- Assist in building your own personalized trading plan to help you succeed in trading the financial markets for the long-term
Trading psychology can also be instrumental in shaping and developing your trading goals and objectives as well as uncovering your trading strengths and weaknesses. Knowing who you are “as a trader” will serve as a major milestone in your trading career. This alone is a gold-mine in making you the best trader that you can possibly be.
Ultimately, you should be striving to be a consistent, confident and profitable trader using a trading style that feels most natural and is just right for your trading personality.
The Psychology Of Trading – Controlling The Emotional Mindset
In order to give you an edge in trading the financial markets, your emotions will need to be under control.
Emotions (such as fear, greed and anxiety) can all have a negative impact on your trading ability and performance if they invade your trading decision making process in a detrimental way. This can ultimately result in bringing about self-sabotage and blowing apart your ability to make clear judgments when trading.
Traders can even freeze up when their emotions become so out of control that they panic and abandon their trading plan altogether.
Being patient and following your trading plan with discipline will greatly help you to keep your emotions in check and to bring about long-term trading success.
How Would You Answer These Questions On Trading Psychology?
- Do you feel like you need to get revenge from a trade after it went immediately against you?
- Would you consider reentering a trade after getting stopped out for a small loss if the trade is now again in conformity with your trading plan goals and objectives?
- Would you consider switching the course of trading from going “long” to going “short” (or vice-versa) if market conditions suddenly change dramatically?
- Do you take profits too soon or let your losses run more than they should?
- Is your pride unnecessarily keeping you in a losing trade far too long thinking that the trade will soon recover in your favor?
- Do you engage in over trading? Or, do you over trade to try to make up for a recent string of multiple losing trades?
- Do you feel like you have missed the “bus” and have a tendency to chase rapidly moving stocks well beyond their breakout points?
- Do you keep widening your stop losses exposing you to even greater losses?
- Do your emotions get easily rattled when the markets become a little volatile or a stock is not behaving as expected?
- Do you feel defeated after suffering a trading loss and emotionally beat yourself up?
- Do you have the patience to wait for a stock’s price to reach your entry target zone before buying it – or do you just buy it regardless of price?
- Do you have a fear of being wrong or even being a failure?
These questions on trading psychology are not meant to size you up as a person, but to help you develop your ultimate trading style that will best fit your trading personality which can help you to succeed as a trader for the long-term.
Once you know yourself better with respect to trading psychology, it will greatly help you to build your trading plan as well as modifying it from time to time to make it even more effective and precise.
Having a carefully thought out personalized trading plan will become your plan of attack in trading the financial markets. It will help you to answer such questions as:
- When to trade
- What to trade
- Why to trade
- When not to trade
Your trading plan will become one of your greatest trading assets that is greatly influenced by the power of trading psychology.
The Psychology Of Stock Trading: A Win-Win For Any Trader
By incorporating the many powerful attributes of trading psychology into your trading plan, you will greatly be prepared to confidently step onto the “playing field” of trading the financial markets and be relieved from much unnecessary trading stress with the odds stacked in your favor to succeed as a trader.
This will lead to making far better trading decisions and bring about a happier and hopefully a successful trading life making consistent profits for the long term… a win-win for any trader!
