They say that the greatest enemy of a trader is fear. He who is afraid of losses fails. Every trader encounters a roller-coaster ride of emotions. From time to time, he feels doubt, greed, nervousness, regret, too much confidence, hope, and more. Although these emotions are normal as a human being, every professional trader knows the fact that it’s never a good idea to be swept by your emotions. Your trading decisions must never be influenced by your emotions.
The true meaning of trading psychology is to not let your emotions influence your trading decisions. This time, we are going to get to know more about trading psychology and how you should prepare yourself mentally when trading.
The Trading Psychology
Trading psychology refers to the trader’s mental and emotional state that dictates its trading actions. Emotions like confidence and hope must be embraced because, in a way, they are helpful. But feelings like greed must be strictly contained. There is another emotion that’s very common among traders – the fear of missing out or FOMO.
Developing the right mindset when trading CFDs greatly helps a trader achieve the best things in life. Being new to the market is never an excuse to make trading decisions rashly. Check out these common emotions when trading and how it affects your mindset as a trader.
Fear
Whenever we sense something important is at risk, our natural reaction is fear. But risks in trading come in many forms – whenever there is bad news on the financial market when you place an order and realize that it isn’t going the way you want it to be or you fear losing your capital.
Because of fear, traders tend to liquidate and overreact as they try to hold on to their positions. You will know that you have strong trading psychology if you refuse to let your fear dictate your trading decisions.
Greed
Greed takes place whenever you have a desire to have excess profits. Remember that great traders in history didn’t achieve success in one day. You need to work hard for it. And when you experience a winning streak, then it is best if you book your profits and simply move on with your trades. Most of the time, if you let your greed take over you, your winning streak will become your biggest disaster.
Regret
Regret happens in two ways – either when trade didn’t work or trade was not placed when it was supposed to work.
Your mindset when you regret something is very dangerous. It will result in placing the wrong trades. The best thing you can do to manage the feeling of regret is to accept that you cannot take all the good opportunities when you trade CFDs. The fact is, when you win some, you can also lose some.
Hope
New traders mostly think that trading is similar to gambling. They expect to win all the time and if they don’t, they start to feel dejected. Becoming a successful trader needs you to have solid trading psychology which should not depend on hope. If you keep on hoping something big to happen as soon as possible, then you are only putting your entire trading capital at risk.
