Having spent three days with my wife at a seminar that added to our knowledge of how to trade on the share market, there was one part of the seminar that really caught my attention.
It was to do with the psychology that would enable someone to become a successful trader.
Psychology is the study of the mind and if you can’t control your emotions, then they will have power over your actions and cause you to focus on your emotions and not on your goals.
In trading, this will make you broke, and in life in general it will destroy relationships and hamper your success journey time and time again.
It is important that we don’t allow ourselves to be pushed around by the crowd, but rather be and act as an individual who has clearly determined and identified both their weaknesses and strengths. By doing so, you will be able to act apart from the pack and take charge of your own destiny whilst travelling the path that you have chosen for yourself.
This is the first step to living your life as VICTOR, rather than VICTIM.
Although you may not be a trader, there are principles of success that a trader requires that each and every one of us require if we are going to succeed in other areas of our life.
So let me take you on a short journey through the victor’s psychology for a successful trader and I am sure that you will be able to apply these very same principles to your business, your family and to other important areas of your life.
When it comes to trading, FEAR is one of the strongest emotions that can effect traders. Fear will cloud your judgment, timing and execution of your strategies.
A fear of being wrong will allow doubts to creep in and if you doubt yourself, and your strategies, your mind will focus on being wrong. This lack of confidence will lead to failure time and time again. Fear with the loss of a trade leads to panic and usually makes the trader to stay in the bad trade all the way to the bottom.
I know for a fact that fear kept me from investing in the share market for many a year. After attending another seminar some time ago, I came away from it thinking that share trading was just too hard. What I didn’t realise was that I had spent time listening to someone who had all the knowledge, and yet probably didn’t trade on the share market as much as he should.
The moral of that story is quite simple: be careful to whom you listen to.
Fear often effects inexperienced traders. The fear of taking a loss on a trade if it goes bad, or losing a profit on any of your trades after you sell them out.
You must learn to trade within your tolerance factor, not being afraid if you make a mistake, and learning by them when you do. Never be afraid of taking profits off the table when they are there. Defeat the fear of not taking a trade or not triggering a stop loss as necessary. Remove the fear of taking your profits too early.
‘FEAR’ IS TERRIFIED BY ‘FAITH IN ACTION’
GREED is like fear because it clouds the mind. In trading, you need to learn when to keep your trade going and when to sell it.
Overextending yourself is greed and it will make you impatient and cause you to rush in, hold, or trade too long. It will also allow you to trade with money that you can’t afford to lose.
Inexperienced traders will put too much money in too few deals. Greed is often triggered by initial success. We become cocky and think that we have the knowledge that will enable us to step in and take a quick and huge win.
However, we must never lose sight of the fact that our focus should always be on protecting our profits, instead of being concerned with how much we want to make.
Our goal should be to become neither fear or greed orientated, but rather goal orientated.
STARVE GREED BY FEEDING YOUR GOALS
In addition to dealing with FEAR and GREED we will need to develop PATIENCE and SELF-CONTROL.
Educated traders wait for the right signals and timing before they pounce. Fools rush in. If you trade through impatience you will lose everything. With patience you can learn to use your time wisely and become more and more proficient in your research.
When it comes to self-control, it is important to realise that if you miss one boat, there will always be another.This is where you must be an individual in both your thinking and in your action. If you’re not an individual, then you are one of the crowd. And these crowds of traders all try to get out of the same door at the same time.
How can you tell if you have joined one of these crowds? Ask yourself the following questions: Do you still think for yourself, or do you listen to opinions and tips, thus taking on board everyone else’s advice?
It is important that you be careful not to fall into this ‘crowd’ where price is the leader and where there are no free thinkers.
So what is THE SOLUTION? As individual traders you must focus on the market objectively, becoming totally emotionless with regard to decisions that surround your stock. You need to plan a system that will keep all your emotions in check whilst trading in the marketplace, and above all become disciplined.
Have realistic expectations and a positive attitude. Trade with knowledge. Accept the outcome of your decisions and learn from your mistakes. And in the process….PROFIT!
Motivational Quote: On the Stock Exchange Of Life: sell fear and purchase faith.