Trading Psychology Guide Vol. I
There are tons of newbie traders out there wondering if trading itself is a simple gambling game that if one’s betting everything on single trending stock and she/he could retire at the age of 30.
However it isn’t true.
Trading itself has very little difference compared with fixing a car, making high quality handbag and making good sushi.
The very key element of trading profitably in the long term is how you employ your trading psychology in your daily trading operations.
Here are several things that could help you building your better trading mandate and discipline.
1. Never sell in panic.
Lots of my students and folks have similar issues that they often bet in big numbers and either they make big money or they lost it all.
The worst is that they are very reluctant to close their position only if they start seeing the stock price plummeted and only then they will sell in panic.
When the stock prices are falling there is still way out, for most big stock crashes there will be dead cat bounce(meaning stock price may come back strongly before the price further drops).
You could sell your shares during that dead cat bounce so there is no need to sell in panic.
2. Knowing when to close your positions.
Many traders are wondering if they are closing their bets too early or way too late. It is vital to have a trading plan before you open a trade. Or else you will be wondering around in the market and miss out all the big moves of the underlying.
Making a solid trading plan is also beneficial for one’s trading mandate.
If he doesn’t know what he is up to, he is likely to lose it all in financial market.
3. Its all about GREED AND FEAR.
Trading in financial market is more of playing a mind game. It is all about control your emotions because all of the emotions will greatly effect your actions therefore you must learn to differentiate your behaviours.
Most importantly, you must battle constantly against your greed and fear. For these emotions will destroy your wealth.
Lots of traders failed to pocket their gain simply because they were too greedy or they are fearing the market won’t rebounce therefore they did not buy the dip.
To sum up, you only grow when you start losing money not making them. With the right mandate you can protect your wealth, but with the wrong one, you end up becoming a rookie in grand casino.
