Trading Financial Market is 100 percent mental. Trading means the buying and selling of one or multiple financial instruments like Index/Stocks/Commodities/Forex to take advantage of price fluctuations, rather than just holding on to the them indefinitely. Success as a trader is a difficult achievement; it has never been easy.
Added to this, the 2020 COVID PANDEMIC crisis brought to the market a new age of volatility, as well as new thinking and new approaches in trading. If you do not know what you are doing, trading will now be even harder.
Markets consist of a multitude of investors from individuals to institutions,each with their own investment agenda. In aggregate, investors’ emotions ofgreed, fear, hope, and despair dictate market fluctuations and directional movements. Similarly, the psychological state of a trader may affect his trading results because his emotions influence his decision making.
To outperform the market and to succeed in trading, a trader needs to take charge of his emotions.To start off, he requires a patient and confident mind.
Greed, Fear, Hope, and Despair form the four psychological statesof the market, swinging sentiment states from optimism to pessimism and repeating it all over again, time after time.
If a trader is confused about what he is doing, the probable win ratio is zero and he might as well give up trading.
The mind is mischievous and it often is the primary cause of failures.The market is always creating noises and if a trader fails to control his inner noises, how can he listen to what the market is trying to tell him?
The market is always dynamic. It is oblivious to your wins or losses. But too many traders blame the market for their failures. They do not consider for a moment that their failures are caused by a lack of preparation and irrational emotions.
Whatever the cause, the best solution is just to move on to the next trade with a clear mind and in good spirits. A good trader should not dwell on the past. A trader’s ego is his greatest hindrance to being successful. The best approach is to turn emotion into a positive tool.
Whenever any negative eemotions stir in him, a trader should take it as a wake-up call. He should not allow such emotion to blur his judgment and derail his trading plan. The most common fault in trading is overthinking—dwelling on the past and not keeping to the trading plan. Besides thinking too much, a trader may believe he is always correct and will refuse to accept the reality of the market. Thus, he should make extra effort to understand more of himself and his emotion, so that he will trade better and feel better.
Besides maintaining the discipline of applying a systematic structure andtechnique in trading, a trader should take note of the following important advice
- Do not attempt to have a preset idea of price level or attempt to pick tops and bottoms of a price action.
- Accept that some points may be sacrificed atthe beginning or end of a trend while waiting for a setup confirmation that the trend beginning or end are in place.
- Understand that trend trading can lead to large gains but also to large losses.
- Trading time frame is a key element in determining trend, because trendc an take place on multiple time-frame levels.
- Trends remain in force until they have exhausted themselves and their reversals are confirmed. Let the market decide when the trend has ended.
- Keep the number of stocks within a range you can manage well.
- Always have an exit plan for every trade
The market changes all the time. It is always trying to throw us off balance. Traders have to hear what the market is trying to say and follow its flow; they need to be responsive and flexible in the development of the trading strategies.