Learn the Importance of Trading Psychology and Skills for Success

1. Why Trade

You trade for many reasons, some of you are rational, and most of you are irrational. Trading in market offers a tremendous opportunity to make money in short period of time. When a beginner wins, he feels invincible, and then he takes risk beyond his capacity and losses everything.

If you know how to trade, you can live your life at your own terms, you chose your own working hours, place and financial freedom.

Trading attracts risk takers, other than an average person, who wakes up in the morning, goes to work, and comes back watches TV and sleep. If he earns few Rupees, he keeps it into bank. On the other hand a trader puts his capital at risk.

Good Trader is a hard working man and intelligent person, He is open to new ideas, He does not run after money, instead put his effort to trade well. He knows, success depends on his skills, if he trade well, if he can differentiate himself from other traders, if he can create a competitive advantages, if he is better, money automatically flows in. So, instead of running after money, he keeps sharpening his skills and try to improve himself each month.

On the other hand traders who are not at peace with themselves often try to fulfill their own contradictory wishes in the market. If you don’t know where you are going, you will wind up somewhere you never wanted to be.

2. A successful trader – is a realistic person, far from Illusion

A successful trader is a realistic person; He knows his abilities and limitations. He takes his decision based on the realistic data, means; his decision is always based on happenings in the market, he observes the market, analyse them, and makes a realistic plan. Professional trader cannot afford illusions.

An amateur makes a couple of losses, gets fearful and starts developing own strange ideas about market. From my personal experiences i have seen hundreds of traders express several fantasies. They distort reality on their own way of success. A successful trader must identify his fantasies and get rid of them.

Trading is a very hard game, if you want to be successful in the long run you have to be very serious about what you do. You cannot afford to be naive or trade because of having some hidden psychological agenda.

3. Trading Psychology and the urge to trade

Success and failure of your trade depends on your ability to control your emotions. Your feeling have an immediate impact on your account. You may have brilliant trading system, but if you are upset, arrogant, or frightened your account is sure to suffer. When you identify yourself as a gambler, stop trading.

You trade against the sharpest mind of the world. If you allow your emotions to interfere with your trading the battle is over.

You are responsible for your own choices, when you are going to trade, at what price, at what time and all. A trade begins when you decide to get into the market, and end when you chose to liquidate. Having a good systems was never been enough. Most traders with good systems washed out because psychologically they are not prepared to win.

Market is tempting, its like walking through the reserve banks vault. It raises simultaneous feelings of greed and fear. You feel Greedy of gaining more and feel fear of losing all. Those feelings of you deprive yourselves to identify the opportunity and danger.

You need to take trading as objective as possible. Keep a spread sheet of all trades, keep maintaining all the slippages, analyse the charts, before and after trade, maintain strict money management. You may have to devote as much energy to analysing yourself as you do to analysing the market.

When i was learning to trade, i read every book that teaches to control psychology, learned all possible ways to control emotions, learned the way to manifest, and direct own energies towards creation. Vedic way of life style has helped me enormously towards a disciplined life, it helps me to focus my energy in right direction.

Do you know, you should not have coffee or tea while analysing market? Taking trading decisions, you should not go to gym in the early morning that increases the metabolism, and blood circulation, so, deviate you from your focus. Instead do hour meditations before entering the market follow vegetarian diet, sleep early, and no alcohol isolate you from most of your peers, creates a competitive advantages. And raise you up.

The Urge To Trade

Many writers and psychologist compare urge of trading with the pleasure of sex or flying jet. Like an alcoholic proceeds from social drinking to drunkenness. Loser takes bigger and bigger risk. Successful trader treats loss as social drinkers treat alcohol. They have it and stop. Once a professional trader encounter several loses in a row, that consider it as a signal of something wrong. And analyse their strategies and readjust. Losers cannot stop, they keep trading, as they are addicted. Hoping for a big win. They cross the line between business risk and gambling. Many losers don’t even know the idea exists.

All Losers have few common characteristics; they make impulsive trade, their trades are based on urge, than calculation and analysis, they are poor in book keeping. Keep shuffling money, and hide their loses from others, after bleeding their own money they start providing advisory, or managing other people’s money.

A loser never knows the reason behind his loss, if he would have known the reason he would do something about it. A loser tries to manage his trading like an alcoholic tries to manage his drinking.

First and foremost a loser need to accept he is a loser, and he cannot control his emotions and loses. Then only he can recover himself.

A trader should identify his risk taking capabilities, he should understand this business is full of professionals, and he is competing with them, even though he is seating idle on a computer in his home. He should understand the difference between business risk and gambling. He should be known by his own capacity.

The most stupid thing an amateur does, he trades on others decision, Analysis, and personal agenda, whether it’s the market Guru, forum, the news channels, or the analyst. Trading is a very individualistic decision, if i take a trading decision, i shall take it based on my personal agenda like, my risk taking capabilities, my capital, the time i am going to give on that particular trade and the money i want to earn out of it.

How, it is possible that you can follow it on a mass medium? Unless its individualistic.

Just remember everybody is here in the market with their own agenda, they are not here to make your money. They are working to earn of their own. And You are repeatedly falling into the trap.

But, a professional trader, study, research, calculate of his own, and come up with his own strategies based on his personal pain tolerance and account size before putting the hard earned money in to the trading system.

A professional trader keeps all his trading record handy, do you keep your trading record? A poor record keeping is a sure sign of a gambler and a loser. Good business man keeps good records.

Your trading records must show; reason of taking the position, time of entry, price, target, stop loss, brokerages, maximum paper profit , loss and adjustments.

4. Winners and Losers

Your success and failure in the market depends on your emotions, and ability to deal with your emotions. It depends upon attitudes towards your risk taking ability, fear of losing or greed of earning more from a single trade.

Every individual in the market are different, as they have different economic back ground, education and society they live in. But, if your emotions are as volatile as the market, and it’s in sync in with market movement you will definitely lose money.

To stay ahead of others, and make consistent profit in the market, you need to act as calm as possible, and always be responsible for your decision.

The market does not know you, it does not bother about your Need, want and demand, You may feel exhilarated when market moves in favour of you and feel depressed and fear full when it goes against your taken positions. These feelings have nothing to do with Market. It does not know you exists.

A professional trader always stays calm, analyses, and gets better each day, learns from his mistakes, study and calculates more, read more books, learn more techniques. Amateurs become excited or depressed because of their trades. Emotional reactions are a luxury that winners cannot afford in the market.

Trading can be very addictive, and emotional trading is lethal. When a beginner hit the ball right for a couple of times, he started thinking of being better than a professional Trader. And start taking position too often with an elusive mind that every movement is providing an opportunity to enter. When there are no as such good opportunities. When they start seeing the truth, the losses already destroyed their Account.

There are few rules winners follow are as follows. ..

  1. Winners Play for Long term.
  2. Winners learn as much as possible, they read, listen to others but, don’t follow blindly. They take their own decision. If they are unable to find any conclusion, they skip the trade.
  3. Market moves on 100 parameters. Winners use several analytical methods to confirm a trade. Market is very dynamic, as winner you should be using different methods for different market, viz, bull, bear or reversal
  4. Winners are very strict in their Money management. It is one of the pillars of your trading strategy. Your first goal is long term survival, 2nd goal is steady growth of your capital, and your 3rd goal should be maximizing profits. Most of the amateurs don’t even know that 1st and 2nd goal really exists.
  5. Winners never take impulsive trade. Winners even take care of their number of trades. If they trade more, they stop trading, as it symbolize gambling.
  6. Winners are very different from losers; they think and feel very differently than the losers. If you want to trade like a pro you have to get rid of your illusions. You need to get rid of your fears or Greed. Trade with your insight.