What is Trader Psychology? Why Should You Care?
Your trader psychology is the way that you control your emotions during trading. It is one of the most difficult tasks that every trader needs to master. Unfortunately, most traders will slip up from time to time. That is ok. Simply step away from the market and get your phycology back on track.
This subject is ignored by most people in the financial industry; however, This topic is the most crucial topic for a trader or investor to learn. From the very first trade, I ever traded I felt the rush of pushing the buy button and watching a trade go through. This is something that disappeared after trading for a while; nevertheless, I still have to manage my mindsets and anxiety that slip up on me. Think about the old ass saying that: “We are our own worst enemies.”
The expert traders call this “Trader Psychology.” There have actually been scenarios where the trader’s psychology has actually remained in such a damaging state that they went with suicide. A basic search of the term “trader death”, will offer you examples of times that an expert trader should have stopped prior to the marketplaces took them to this dark location. I understand many of you aren’t a professional trader, so I am going to keep these tips to people that trade online as a source of income. I have compiled a list of things that will hurt your trading mindset.
When Should You Just Stop?
This is really straightforward; stop trading when you have been taken a huge loss or multiple losses. I have lost money in the markets and made the wrong call, but I learned that this isn’t the time to go all in and keep trading. This plays games with your trading phycology and will make you second guess everything. The worst thing that a trader can think, “I have to take more risk to earn this money back.” This is the mindset that can cause you to blow out your entire account. In simpler terms this means you will trade your account until you have no money and have to start all over again.
Are you Following the Herd?
What is a techniacal deffinition of the herd mantality? The herd mantalitly is doing something just because everyone else is. This can be booth good or bad on the traders phycology. In recent history, we have scene how optomism and pecamisom will take the market to extreme highs and extreem lows. As the famous trader Larry Williams says, “You should buy when everyone is selling and sell when everyone is buying.”
What Larry Williams is talking about is actually for short term traders but doing what everyone else does in the long run can hurt you as well. Think about the 2008 ressision and the people who saw all their freinds making money. Then they bought in right before the stock market crash. Another example is the commodites market. Everyone said Gold and Silver are going to the moon and people bought when the commodities where overpriced.
Does The Financial News Help You?
Lets think about what the media is and isn’t. If you wach any news network you will notice that they always have an underling agenda. I don’t care what your political belifs are. I will warn you that this will be bad on your trader phycology. They will always preach some sort of agenda that is different than yours which will make you second guess your treading stratagy. Think about who owns most fincial networks and it is normally instatutional traders. Not always but sometimes they use these networks as a way to convince the normal person to buy or sell their investments.
Lets not forget about one personality that is famous for saying, Buy! Buy! Buy! I will admit that this is some entertainment, but should ony be entertainment kind of like Jerry Springer or Judge Judy. Many of these reporters on finacial news are not always correct. I honestly belive that they make more money off book and membership sales then investing or trading.
Take Your Time and Trade Smart
Don’t listen to anyone or be too egar to jump into trades or investments. Jumping into trades you don’t feel good about will loose you money. I understand that you will hear things online about once in a liftime opertunites and people yelling “Buy Now Or You Will Miss Out!” This is not how most profitable trading is done. It isn’t about one hot pick that will make you rich. It is about pulling money out of the market day after day and increasing your wealth. This is the smart way to controlling your traders phycology and making money in the long run.