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The Importance of Trading Psychology

By SiliconIndia   |   Friday, 10 November 2017, 12:55 Hrs
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If you want to be successful in the trading market, there are certain characteristics and skills that you are required to have. One does not simply wake up and suddenly tell themselves “today, I am going to be a trader.”



In order to be a financial trader – a successful one – you start with the idea, yes; but then you ask yourself this question: am I cut out for it? Do I have the ability of understanding the way a trading company works, the fundamentals, and the ability to pick at the direction of a trend from the moments it sets loose?



Those are only just a few aspects of trading that you ought to keep in mind. The psychological part of the trading market is just as important as the main strategies. The trading charts are often darting and changing on short notice, so the trader needs to be able to make a calm, collected decision. And in order to do that, they need presence of the mind and the ability to not let emotions get in their way.



The Understanding of Fear



Computer scientists feel fear when the screen suddenly turns blue. Traders, on the other hand, feel the same terror when they see the screen pulsating red. It’s a sign that the stocks are down – which means bad news for their trading. It’s natural to be scared.



What’s important, however, is understanding that fear and knowing how to contain it. Fear is a normal reaction to what we might see as a threat, so identifying what you are afraid of might help you come up with a better solution.



Also, if you are familiar with these fears, you might be able to isolate them during a “freak-out” and concentrate on moving past it. It may not be easy, but learning this part of trading psychology might make things much easier for you. Trading webinars might be able to offer you some insight into that.



The Enemy That Is Greed



Have you ever heard the saying “pigs get slaughtered”? Since they hang onto all that fat, it’s natural that they will be the first to go on a Christmas table. Some traders are not that different; they try to hang to their winning position for far too long, in the hopes of getting every single tick. This psychological trait is no good, since traders are always at the risk of getting blown off their positions.



While greed may be one of the seven sins, it’s also natural. It’s part of our instinct to try to do better – to earn more. But traders should focus on rational decisions for their business rather than hang on to their emotional whims.



Final Thoughts



It isn’t all about strategy – although that makes a good part. It’s about understanding yourself and, based on that, coming up with rational decisions that have been well thought-of. Indeed, a trader is supposed to read the chart carefully and come up with decisions – but if they let their mind matters come in the way, it might cost them a lot of profit.



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