It needs the proper ability and basic technical skills in order to become king in the financial market. The ability to understand the inner workings of a company, its fundamentals and the ability to determine the direction of the trend are a few of the key traits needed, but none of these holds much importance as emotional well-being matters.
One of the best ways to promote discipline, as a trader, is to create a business plan. Generating income from trading activities is a business and should be treated as such. You would never risk your hard-earned capital in a new car washing venture or restaurant, for example, without having a plan that shows that you can make money. It should be no different with your trading business.
Here are some of the situations which a trader should handle in a positive manner:
- Restrict the fear:
Fear is an unpleasant emotion caused by the belief that someone or something is dangerous, likely to cause pain or a threat. In Stock Trading, the fear is losing hard earned money. Every trader first goes through proper analysis before clicking that “Buy” option.
Immediately hands start trembling, doubts arise, you see a small bit of red and you immediately pull out of your current trade. Fear will break the account in a very slow manner, most likely it will be from trade fee after trade fee of you buying a stock and losing a few cents and selling right away or making a small profit and locking it in right away. Have a trading plan and stick to it, make your trades count.
- Avoid neglecting certain Facts:
Traders who over actively pursue confirmation of their potential trades tend to Miss Key warning signs that would normally have protected them from unnecessary losses. In an attempt to build a case for their beliefs, traders miss facts.
Traders filter the information and price action. It comes under paradigm. Our character, our attitudes, our past, our culture, our experiences, and our beliefs all influence that paradigm. They influence our view of the world. Ultimately, this leads to traders fighting the trend, with the smart money, and they start losing money with the bad trades they make.
- Stay calm:
Impulsive and emotional decisions are created in our own mind. Most of the time the problem occurs when a trader feels under pressure to take an immediate trading decision. However, traders should aim at staying calm and patient when trading to optimize results.
Greed, fear, hope, and impatience are the enemies of traders, while discipline, patience, perseverance, and balanced confidence are their allies.
- Never use the opinion of multiple people:
Not only in trading, but in every field, if you do not trust your method and abilities and follow a consistent approach, you will not get anywhere near success.
Be clear and precise about your rules and approach to trading and then move forward. Sometimes, we change our best rules after being impressed by the opinion of others. This has to be avoided at all cost.
- Have your own long-term as well as short-term plans:
Never focus only on one side of the market. As this will boost your urge to open a trade and work on it based on your emotions/opinion. Always write a trade-plan beforehand and try to include the long and short-term plans in that.
This will help you to control your emotions even when the market looks bullish or slump. Always stick to your plan regardless of the temptations offered by the market. Subscribe us to get experts advice from one of the most trusted Malaysia stock advisories.