Making the Psychology of Trading a Part of Your Everyday Trading Tool

Making the Psychology of Trading a Part of Your Everyday Trading Tool

The state of the mind plays a huge contribution in any trading acts that you engage and it is essentially important that you have to prepare yourself mentally before any trade decision takes place.

All of us have our own threshold level of risk taking before we break down and we need to develop a set of rules to keep our emotions in check should the worst of things happen to us during trading. All of this will not be possible if we didn't have trading tasks prepared beforehand to map out our procedures.

Emotions can come into the picture of wrecking your perfect profitable trade setup, leaving you wondering what went wrong and feeling the pinch of not profiting when you should.

Encountering commonly played out scenarios such as holding on to a losing position too long with the hope that the market will work its magic or in constant fear that you might not exit out with more profits. Each time you trade it will be torturous and soon you will lose the faith in your ability to trade and perhaps your interest in trading.

Steps to develop a sound plan can be relatively simple but the mental discipline to stick to your plans during trading can be a real challenge each time as the price movement of the markets triggers the emotions within you . Here's suggested some simple tasks that I personally go through and serves as a guide for you to develop and follow throughout your trading day:

1. Self Analysis

You have to assess your emotions prior before trading to make sure that you can handle situations logically. If there is too much emotional involvement with other activities prior to trading periods, it is advisable to avoid trading altogether until you are ready for it.

2. Mental rehearsal

With a set of strategies and trading rules at hand, you have to constantly play out the different scenarios especially those that are worst possible cases to prepare yourself if such situation occurs but while maintaining a positive attitude to handle them. You have to stick to your rules like your whole life depends on it.

3. Stalking the market

Stalking is a form of risk control as you seek to find the best entry to your strategy. Observing and slowly move in as the signal for you to enter draws near but you need to be alert to all the noises that is happening in the market that can derail you from your intended target.

4. Action

Taking action is one of the hardest to implement as you have to be aggressive and bold in taking that step but it also reaffirms your confidence in your trading plan and gives you the required confidence for the rest of your trading process.

5. Debriefing

Once all the action is over and the results are out, you have to review what happened throughout the whole trading process. It will give you lessons on what went wrong and how you can improve further.

The constant implementation of these simple tasks will allow you to get exposed to the fragility of your own mind but each time you do so you will be conditioning yourself to trading success in time to come. The psychology of trading itself will form part of your essential trading toolkit and becomes your habit eventually.

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