Mastering The Psychology Of Trading
Trading can become emotionally difficult, especially when prices are moving fast and you are witnessing your profit or loss fluctuate. The emotional consequences can lead him to perform an impulsive operation, where logic and rationality are overcome by the emotional part. Due to this, it is very supportive to generate a trading plan to stay focused on a strategy when we perform each operation.
Next, we will discuss the typical emotions when trading and how to overcome them:
Every trader is waiting for his operations to be winning and that his analysis of the market was correct. But expectation can lead to confusion, even more so if prices start to turn against you. Be aware of this and stick with your strategy. When prices start to move in a direction opposite to what you are targeting in your trade, you should close the position at the best possible price.
Feeling fear when opening a position is a fairly common feeling, especially in beginners. Most of the fear associated with trading results from taking a loss. You need to accept that losses are common when it comes to trading and you should not let fear get in the way of taking a solid opportunity. If you are still fearful towards trading, then perhaps you should look for longer periods of time.
This is perhaps the worst emotion for some traders. Greed can make you chase the market, generate losses, over-trade and most damagingly, convince you to put your strategy aside. Create a trading plan and stick to it. Some traders believe that the best way to follow your own rules is to write them down – that way, you have a visual reminder every time you open a position.
The best way to protect yourself from emotions that have a negative impact on your decisions is to treat trading like a business. You need to create a detailed trading plan and strategy behind each position you take and follow the rules of your plan. Even the best traders suffer losses. It is part of being a trader. The most important thing when you suffer a loss is to learn from it, not repeat the same mistakes, and move on to the next potential opportunity.