Trading Psychology-The Key to Making a Fortune
Trading Psychology-The Key to Making a Fortune
Something important is missing
There are a good number of traders and investors who have studied, and learned, solid trading strategies and methods. Sometimes they have fairly good results, but can never seem to reach the plateau of the very best. They know most the proper trading rules, but what really matters, the number in their trading accounts, seems to act like a roller coaster. Obviously, something important is missing. The problem lies not within the rules, strategies, or methods. The problem is from within themselves. Its how they think. Its their trading psychology.
Human nature and emotions
The very best traders and investors, the top 5 to 10 percent, think differently from everyone else. That is why they are consistent winners. The factor that determines their superb trading results is psychological. They understand, and implement correct trading psychology. Normal human nature does not fit well with the characteristics that are synonymous with trading success. A great example has to do with emotions. If you allow emotions, such as fear, greed, and hope to influence your trading decisions, it will cloud your thinking. You must be able to think objectively to be successful in the long run.
Retraining our thought processes
From a very young age, our minds are wired to think in certain ways. As an example, we are taught to look for good deals, or lesser priced items. This line of thinking usually does not work well in the stock market. Cheap, or beaten down stocks, usually go down more in price. On the other hand, stocks that many people believe are too expensive, usually go up higher in price. To become an elite trader, you will have to go through a major retraining of your thought processes. This is the only way you can develop proper trading psychology.
Getting into a winning state of mind
Developing a winning traders mindset is not an easy task to accomplish. You will be going against, what is considered normal human nature. One of the keys is to completely accept the risk you are taking. This will eliminate the fear of losing, which will cloud your judgement. It is wise to practice good money management, by pre-determining your risk before putting on a trade. You also need to understand, and accept, anything can happen in the market. There are no two moments that are exactly the same. It is important to realize all trading is based on probabilities. Implement a trading plan that puts the odds in your favor on each trade you make, and trust your edge to make you successful in the long run. All of these fundamental beliefs are vitally important to your trading psychology. How you think is synonymous with making a fortune. Basically, you are just waiting until the odds are in your favor, and then repeating the process over and over.
The world's best traders and investors have a mind-set that makes it easy for them to stay objective. They have no problem remaining disciplined, focused, and confident, even when the market goes against them. Fear, and other emotions are not part of their trading equation. This eliminates most of the trading errors experienced by others. The elite trader can enter, or exit the market with no hesitation or conflict. Their mind stays clear at all times. Once you completely accept certain key truths that exist in the market, you could become very wealthy. Proper trading psychology can take you to the promise land.
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