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Trading psychology is as important as other attributes such as knowledge, experience and skill in determining trading success. While fear and greed are the two most commonly known emotions associated with trading psychology, other emotions that drive trading behavior are hope and regret. Emotions often cloud our decision-making and prevent us from acting in a rational manner.
The psychological aspect of trading is extremely important. A trader is often darting in and out of stocks on short notice, and is forced to make quick decisions. To accomplish this, they need a certain presence of mind. They also, by extension, need discipline. Emotions can be seen as the trader's worst enemies; they often lead to misjudgment and loss.
If you are greedy in real life then you may lose most of successful trading deals at the market. In this case it is recommended to do another kind of business which is more calm. If your greed knows no bounds, it is better to play in a casino, it will get you closer to nature and cheaper for the purse. This emotion has been the main reason behind many trades that have gone from large gains to large losses. To thwart this emotion, try to take an objective look at the reasoning behind your positions.
Traders may behave based on rational and non-rational motivation. Rational motivation is usually present to the first occurrence in the market of a young trader as well as in the work of a professional trader.
Irrational motivation is expressed in the player's excitement and is present in almost every trader, however, professionals control their passion, and non-professionals become slaves of emotions and doom themselves to failure.
How to identify the influence of greed?
If a trader asks the other about the market situation.
If he tells others about his open positions.
If a trader does not have a plan drawn up before trading.
HOPE AND EXPECTATIONS
As a factor in inspiring a trader on the conclusion of transactions is the hope of making a profit. Of course, the meaning of a work is in making money. However, at the prevalence of hope over expectation you run the risk of overestimating your own capabilities in the analysis of a market situation. Hope must be subordinated to respect and to the calculation, and greed. It is great hope that leads beginners to ruin.
Hope determines the behavior of traders in two major cases:
When the losses are still insignificant, hope is inevitable and in some measure may be justified;
At the second stage, with the further growth of losses hope dates back to the peak. At this point trader finds difficult to separate its hope of real steps of the market.
Fear arises when you get a loss. Fear paralyzes traders and they cannot stop and lose everything. Fear makes them open new trading positions that usually only speeds up the devastation. However, it is better to do something than to sit idly and watch as the dream of great future evaporates with changes in quotes.
Weak points of market participants are the main source of income for experienced traders.
We invite you into the investment world of InvestAZ. You can follow the steps below to be an online investor with us.
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