Committing physical and mechanical errors in trading are easy to identify and fix. What makes it hard, especially for beginners in trading, are the psychological emotions that we cannot physically perceive. There are no outside factors that can fix these. Only the trader himself will be able to relieve him of these. These human emotions usually happen within us, without us knowing that they are actually affecting us especially our decisions. Here are 5 emotions that go against trading which we have to conquer in order to perform better.
By definition, hope means to want something to happen or become true. It doesn’t seem harmful when we look it that way, but in trading, it plays a big role. Reading this, you probably know the importance of trading plans, setting a stop loss, and the discipline to follow these. That is where hope enters. When a stock is going up or down, it is hope to recoup losses that make the trader ignore the initial stop loss he set. The problem is the market doesn’t care about how we feel, and because of its unpredictable trend, this way of trading usually results to losing more.
Fear is defined as the anticipation of the possibility that something unpleasant will occur. Studies say that most traders suffer from fear the most. It is the main reason that stops a trader from trying again after experiencing a few losses. There are a lot of instances wherein a trader does not enter a quality investment due to fear of losing more. I am not saying that a trader should not listen to his fear as sometimes it can also save him from more loss. However, a good trader should not let his fear stop him from thinking rationally and be able to recognize profitable investments.
Greed is commonly defined as an excessive or rapacious desire, especially for wealth or possessions. Trading with greed tends to result to wanting more and more. However, it is a wrong practice to anticipate your profits in trading while the position is still open. A trader should focus more on the process and how to improve it instead of looking forward to profits which are often unrealistic. There are also times wherein a win turns into losses when traders let greed work its way in the trade. To play it safe, stick with the initial plan and put effort into developing your strategy more. That way, profits will come your way naturally without you even noticing it.
Anger is defined as loss of self-control from a feeling of displeasure. After a series of losing trades, there is this feeling of anger that wants to drive us into adding to lost trades in order to regain our losses. This is called revenge trading. However, the market usually works the other way around. Just when you thought it was going to snap back again, the trend continues to decline, thus resulting to more losses. The safest way is to follow your stop loss plan to minimize the amount of losses.
The feeling of regret means to be unhappy or disappointed about something that has happened or been done, especially a loss or missed opportunity. It is only natural to feel regret about the bad decisions we make, especially in trading. But it is also not good to focus on lost trades and missed opportunities. A better way is to assess and evaluate what was done wrong, look forward to new profitable opportunities, and apply what you have learned.
It is perfectly normal, as human beings, to feel these kinds of emotions especially in a field as risky as trading. What makes it bad is when we let these emotions overwhelm us to the point that it controls most of our decisions. The best way to avoid this is to recognize these feelings and know when to set them aside. Putting our trading plans and strategies first and having the discipline to follow them without wavering because of these emotions will help us improve our trading performance.
If you are really serious in trading, read about the 10 good online trading habits of a successful trader.
Stay updated on market news, trends, and tips by regularly visiting Trade12. Trade12 is a reputable online trading broker with years of experience in the field. Register an account now and enjoy a wonderful trading experience!