Become a better trader
There are many technical skills required for traders to be successful in the financial markets – the ability to understand a company’s fundamentals and the ability to determine the direction of an asset’s trend are the main ones. But neither of these two abilities are as important as a trader’s mindset: the ability to manage emotion, think quickly, and exercise discipline- what creates trading psychology.
The psychological aspect of trading is crucial. Traders need to think fast and make quick decisions, analyzing stocks in the short run. To be able to accomplish this, they need the full presence of mind. They need discipline. Discipline is required to stick with previously established trading plans and knows when to take profits and cut losses. Emotions are just enemies.
Containing emotion and exercising discipline are key to making money
When traders get bad news about a specific asset or the market in general, it is not uncommon to get scared. They may overreact and feel frustrated to liquidate their holdings and go to cash or to step back and wait without taking any risks. If they behave like this, they may avoid certain losses, but they also may miss out profits.
Traders should understand that fear is a very natural reaction to what they consider as a threat – in this case, to their potential of making money. Measuring fear is very important, and traders should consider pondering what they are afraid of and why they are afraid of.