There are a number of skills and characteristics that are expected from traders in order to be triumphant in the financial markets. Some of these skills and characteristics are the ability to fully comprehend how a company works, the fundamentals of the financial market, the skills to determine the direction of the trend, and no to forget also the facility to keep in check one’s emotions and maintain the needed discipline in the field.
This is where Trading Psychology comes into the picture. Read on to learn more about the psychological aspect of trading, which is indeed important as you go along the process.
Why is there a need to know Trading Psychology?
The reason for this is somewhat simple: traders are usually faced with rushed notices of in and out of stocks as wells as the need to make immediate decisions. Presence of mind is a requirement and emotions could not, in any case, interfere with your decision-making and strategies.
Trading Psychology relates to the mental makeup of an individual which can determine trading success. It is just as important as the other characteristics and skills required from a trader.
What is the use of Trading Psychology?
It is essentially normal for traders to feel scared when bad news comes out from a specific stock or about the market in general. When such occurrences happen, a trader may react excessively and be impulsive with his or her decisions or minimize making any risky move. Losses can be avoided if such situations happen, yet a trader can miss out opportunities if he or she continues to react that way.
The use of Trading Psychology is to be able to understand a trader’s source of fear and how they can better deal with it. The next time the same scenario happen, a trader can now better identify, handle or even isolate such feelings in the course of a trading session.
Who needs to apply Trading Psychology?
Every trader is expected to develop this characteristic in order to be successful in the field. However, there are greedy investors who would try to get all available last tick. Greed is not a good trait when trading as it may lead to devastation since a trader is always going for every risk just to win a profit.
Yes, it is not easy to rise above greed. Yet, a trader must be able to recognize it soon to be able to come up with rational business decisions instead of moving due to instinct and emotions.
When to use Trading Psychology?
It is vital that every trader must be able to recognize any destructive emotions before it can affect your trading plan. Traders must also take into consideration that the market is random. There are times that a trader may be in complete control of a situation or vice versa. Thus, you have to remove any emotional attachment on things happening in the market. A trader must be able to see that anything can happen in the market.
To win at trading, it does not simply rely on the system, the equipment you use or whatever external factor. It boils down to the inner you – if you can accept total responsibility on whatever the results of your trading.
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