There are many qualities and skills, which traders need to succeed in the financial markets. Ability to understand fundamental market drivers and determine the direction of trends – here are some of the key skills. However, none of them are as important., as the ability to limit emotions and maintain discipline.
Торговая психология
The psychological aspect of trading is extremely important, and the reason for this is pretty trivial. Traders often rush into and out of the market in short-term trades, and forced to make quick decisions. Чтобы достичь этого, they need some presence of mind. They also need to exercise discipline., to adhere to pre-established trading rules and plans, and know, when to take profits and losses. Emotions in this case simply cannot prevent.
Understanding fear
When trader sees a fall in the price of an asset on his monitor (if he holds long positions), and bad news weighs on the markets in general, it is quite natural, that a trader may be overwhelmed by fear. When it happens, he may overreact and choose to liquidate all of his trading positions, to get out in cash and refrain from risk. If he does it, it can avoid possible losses, but also miss profits.
Traders need to understand, what fear – it's just a natural reaction to, what do they perceive as a threat (in this case, maybe, a threat to their capital or profits). In this case, they could be helped by determining the degree of fear.. Or are they better able to deal with fear, if they think it over, what exactly are they afraid of, and why are they afraid of it.
Also, thinking about this problem in advance and knowing, how he can instinctively react to her or perceive certain things, the trader can separate and identify the feelings that arise during the trading session, and then try to focus on avoiding emotions. Конечно, it may not be easy, and it will take practice, but it is imperative to be successful in trading.
Greed – as the main enemy
There's an old Wall Street expression, what “pigs go under the knife”. This is how greedy traders are characterized., who want more and more. Greed in traders and investors makes them hold on to winning positions for too long, trying to get everything to the last point. This trait can be devastating to overall profitability., because a trader always runs the risk of falling under a reversal and getting a loss instead of a profit.
Greed is not easy to overcome. The fact, what many of us have, seems, have an instinct to always try to do better, trying to get at least a little more to that, what already is. The trader must recognize this instinct, if he is, and develop trading plans, based on rational decisions, not on some emotional whim or potentially harmful instinct.
Trading rules
To correctly respond to market events, before facing an emotional or psychological crisis, traders should formulate trading rules in advance. Traders can set limits, based on their reward-to-risk ratio, to get them out of the market regardless of their emotions. Например, if the market price of the asset is 100$, then the trader will have to exit at the level 102.55 or 97.5$. by placing an appropriate stop or limit order.
Certainly, setting price targets may not be the only rule. For example, trader can decide, that when certain macroeconomic news is released, it will open a long (or short) Position. Or, if it becomes obvious, that a large buyer or seller has entered the market, a trader may decide to exit the market.
Traders might also consider daily profit or loss limits.. In other words, if they get X $ profit during the day, or lose Y $. then they stop any operations for that day. This often plays a positive role in the psychological state of the trader and the overall trading result., because sometimes it's better to take that, what is, than trying to get more. Since traders are in the heat of trading battles, к сожалению, often “in pursuit of a crane, they miss the already caught tit”.
Creating a trading plan
Traders should try to study the market of interest to them as much as possible.. For example, if a trader is interested in and actively trades shares of pharmaceutical companies, then it makes sense to study this business well. Similar, if he is going to trade commodity currencies, then he should rather carefully examine all the factors, which may affect their exchange rate.
For that, to do this, you can first formulate a self-study plan. If possible, schedule regular attendance at trade seminars or conferences. Also, it makes sense to plan and devote as much time as possible to the research process. This includes studying price charts., reading macroeconomic analysis or analyst reviews, so that by the beginning of the trading session the trader is fully armed. Comprehensive knowledge alone can help a trader overcome fear problems., so what is it – very handy tool.
Besides, important, for the trader to experiment from time to time with new market instruments and new strategies. For example, using options as a hedge of risk, or another principle for calculating the levels of stop orders. One of the results of experimentation, in addition to directly improving trading results, it can be the acquisition of a very important skill for the trader to conduct research and reduce the emotional impact.
Finally, traders should periodically review and evaluate their trade. This does not only mean evaluating profitability and individual positions., but even then, how they prepared for trading sessions, how timely they enter markets and how are they developing in terms of continuing education. This periodic evaluation can help the trader to correct mistakes., which will ultimately improve trading results. It can also help them maintain the right mindset and be psychologically prepared to run a trading business..
Conclusion
It is often very important for a trader to be able to read correctly. charts and have the correct technique for executing transactions, but there is also an equally important psychological component of trading, not to be missed. Setting trading rules, building a trading plan, doing research and gaining experience – here are those simple steps, which can help a trader overcome emerging emotional barriers to successful trading.
