Category: 06. Psychology

Stay Flexible

It’s important for traders to remain flexible and consider experimenting from time to time. For example, you might consider using options to mitigate risk. One of the best ways a trader can learn is by experimenting (within reason). The experience may also help reduce emotional influences. Finally, traders should periodically assess their...
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Conducting Research and Review

Traders need to become experts in the stocks and industries that interest them. Keep on top of the news, educate yourself and, iif possible, go to trading seminars and attend conferences. Devote as much time as possible to the research process. That means studying charts, speaking with management, reading...
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Setting Rules

A trader needs to create rules and follow them when the psychological crunch comes. Set out guidelines based on your risk-reward tolerance for when to enter a trade and when to exit it. Set a profit target and put a stop loss in place to take emotion out of the process. In addition, you...
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Overcoming Greed

There’s an old saying on Wall Street that “pigs get slaughtered.” This refers to the habit greedy investors have of hanging on to a winning position too long to get every last tick upward in price. Sooner or later, the trend reverses and the greedy get caught. Greed is not easy...
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Understanding Fear

When traders get bad news about a certain stock or about the economy in general, they naturally get scared. They may overreact and feel compelled to liquidate their holdings and sit on the cash, refraining from taking any more risks. If they do, they may avoid certain losses but may...
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Snap Decisions

Traders often have to think fast and make quick decisions, darting in and out of stocks on short notice. To accomplish this, they need a certain presence of mind. They also need the discipline to stick with their own trading plans and know when to book profits and losses. Emotions simply...
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Technical Analysis

Trading psychology is often important for technical analysts relying on charting techniques to drive their trade decisions. Security charting can provide a broad array of insights on a security’s movement. While technical analysis and charting techniques can be helpful in spotting trends for buying and selling opportunities, it requires an understanding and intuition...
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Understanding Trading Psychology

Trading psychology can be associated with a few specific emotions and behaviors that are often catalysts for market trading. Conventional characterizations of emotionally-driven behavior in markets ascribe most emotional trading to either greed or fear. Greed can be thought of as an excessive desire for wealth, so excessive that...
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KEY TAKEAWAYS

Trading psychology is the emotional component of investor’s decision making process which may help explain why some decisions appear more rational than others. Trading psychology is characterized primarily as the influence of both greed and fear. Greed drives decisions that appear to accept too much risk. Fear drives decisions...
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What is Trading Psychology?

Trading psychology refers to the emotions and mental state that help to dictate success or failure in trading securities. Trading psychology represents various aspects of an individual’s character and behaviors that influence their trading actions. Trading psychology can be as important as other attributes such as knowledge, experience and skill...
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