How to Master Trading Psychology

5 trading roadblocks & how to overcome them →

Hey there 👋🏼

Today in less than 5 minutes:

1) The most ignored (but important) part of trading
2) 5 things holding you back from making consistent profits
3) 3 effective ways to overcome those roadblocks

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The most important thing

Most newbie traders try to learn as many trading strategies as possible. However, most assume that copying the strategy of other successful traders is the only thing required to make profits.

Many are unable to make it despite knowing everything about a strategy, because profitable trading requires one more crucial element, and not everyone is focusing on it…

The right mindset.

Trading psychology is like salt in cooking 🍲
Too much fear or greed can spoil your decisions, just as too little caution can leave you bland. Like a pinch of salt enhances a recipe, managing emotions optimizes your trading strategy.

Before we aspire to build the right trading psychology, let's first understand the 5 emotions that essentially need to be controlled for a successful trading journey.

5 emotions holding you back from being profitable

😨 Fear

There’s always a fear of incurring losses as well as the fear of losing out on the profits one has made. If you’ve been party to some losing trades in the past, and this is stopping you from taking a new trade altogether, then you are dealing with fear.

🤑 Greed

Probably the emotion that got you into trading is greed. Although a little greed is needed to be a successful trader, an overdose of it can cause more harm than good. If you're holding a position beyond your target price to scrape more, or if you've entered a trade with an unfavorable risk-reward ratio, it's a sign of being too greedy.

😪 Regret

Wishing you would have bought or sold a stock/option at a more opportune time, despite following your trading system correctly, is a clear sign of regret. Having more objectivity with your trades and accepting the fact that not everything is controllable is a way to combat the feeling.

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🫣 FOMO

Just a different version of social anxiety, ‘FOMO’, or the fear of missing out has ruined the journey for many traders. Entering into a trade way later than you should or changing your trading style just because it worked for someone else means you are giving in to FOMO.

👑 Ego

If you make some profitable trades and start feeling like a trading wizard, then my friend, you’re letting success get to your head. You wouldn’t realize how fast ego & overconfidence can stray you away from your trading plan.

Read on to find out 3 effective ways that will help you develop the right trading psychology.

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3 effective ways to overcome your emotions

1) Recognize that you’re not perfect
Traders are human, after all. Recognizing that you’re getting influenced by emotions is the first step to managing them. One handy method to spot emotional hiccups is by maintaining a trading journal. Once you start recording your entries, exits, and reasons for the same, you’ll be able to spot how much of your decisions are guided by emotions.

2) Systemize the game
Notice how a McDonald’s burger tastes the same regardless of whichever employee makes it. This consistent quality is ensured because they have systemized the burger-making process 🍔 Similarly, you need to have a robust trading system in place. If you establish a clear criterion of when to enter & exit a trade, and how to set a stop loss, it removes uncertainty to a great extent. A defined process helps keep emotional decision-making at bay.

Keep in mind that no strategy works 100% of the time. There might be instances when a system doesn't work, and exceptions happen. The key is to acknowledge that you can't always be in control. It's crucial to have a plan for those times when things don't go according to the original plan.

3) Strengths over weaknesses
The best way to win at trading is by playing to your strengths, i.e. choosing and sticking to a strategy that best suits your characteristics. This might help 👇🏼

Source: FortuneNodeOfficial on Medium

One way you can learn to master the art of risk management & become a disciplined trader is by joining Mr. Kirubakaran Rajendran’s Risk Management & Trading Psychology Course. Use STOCK10 for a 10% discount & get the course for just 359.

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