Become a better trader

There are many technical skills required for traders to be successful in the financial markets – the ability to understand a company’s fundamentals and the ability to determine the direction of an asset’s trend are the main ones. But neither of these two abilities are as important as a trader’s mindset: the ability to manage emotion, think quickly, and exercise discipline- what creates trading psychology.

The psychological aspect of trading is crucial. Traders need to think fast and make quick decisions, analyzing stocks in the short run. To be able to accomplish this, they need the full presence of mind. They need discipline. Discipline is required to stick with previously established trading plans and knows when to take profits and cut losses. Emotions are just enemies.

Containing emotion and exercising discipline are key to making money

  • Understanding Fear


    When traders get bad news about a specific asset or the market in general, it is not uncommon to get scared. They may overreact and feel frustrated to liquidate their holdings and go to cash or to step back and wait without taking any risks. If they behave like this, they may avoid certain losses, but they also may miss out profits. Traders should understand that fear is a very natural reaction to what they consider as a threat - in this case, to their potential of making money. Measuring fear is very important, and traders should consider pondering what they are afraid of and why they are afraid of.
  • Overcoming Greed

     

    On Wall Street, there is a saying “pigs get slaughtered. This is for greedy investors hanging on to winning positions too long, trying to get every penny. Greed can destroy your returns because a trader is always accompanied by the risk of blown out of a position.

    Greed is not easy to be avoided. It is based on that human instinct to try to get just a little more. A trader should understand that he can not go after this instinct, he needs to have a good plan and stick after it, based on cold business decisions, not emotional feelings.

  • Setting Rules

    To keep their heads in the right place, avoiding all the dramas that might come across, traders need to create rules. They should develop guidelines based on their risk tolerance when they will enter or exit the market. Additionally, a trader should decide that in the top of certain developments, such as positive or negative gains or overall political events, the trader will buy or sell an asset.

    Traders should be wise enough to put a limit on the amount they are willing to win or lose in a day. If the profit target is hit, they get the money and usually run away, and if they have losing results, they fold up their tent and pack home, to prevent any further losses and wait to trade another day.

  • Doing Research and Review


    ​Traders should be learning continuously, educating themselves in this area of interest and, possible, attending different seminars or conferences over trading online, technical analysis, fundamental analysis, reading and interpreting charts and graphs. Going ahead, it’s important for traders to remain flexible and to consider all the new possibilities and experimenting with new instruments time after time. To conclude, traders should review their performance as well. So, they will be able to correct any possible mistake of the past which caused any undesirable results.