Trading Psychology For Investing in Stocks

How the same system means different to different people? Why results are not the same under similar market conditions? The difference is in the trading psychology of the investors. What you invest is no doubt important; but how you invest, what you invest is more important. The psychological preparations, as you enter the market, for another round of investment related activities needs to be flawless, and your mental condition stress-free! Decisions taken under stress and duress are not expected to give profitable results. Mental toughness of the highest order is required during the fast-paced activities of the business hours of the exchange, and on occasions even thereafter!

According to some investors who are new, to trade in the share market means to grab profits always. If luck favors, and if you are through with a couple of profitable trades, you feel that you have mastered the subject of investment. You continue to hope for such dramatic happenings, being unaware of the real nature of the market. A stunning loss and all your hopes are dashed to the ground and the entire profits over the days are wiped out.

Mental challenges are as important as the economic challenges of the trade. Picking up the right trades at the right time, involves lots of calculations and projections. For example, a day trader has to take split-second decisions to buy or sell.

You are your own friend, and you are your own enemy in the share market. No athlete can maintain one’s peak physical fitness condition without regular practice. Similarly, unless you watch and study the developments taking place in the market with regularity, you cannot turn out to be a good investor. Your mood and mood of the market have to function in tandem.

Not knowing, rather not following the trading discipline, and investing with overconfidence that something dramatic is bound to happen in your favor, is a bias that you must overcome. Some investors feel that they know everything about the investing art, with a few successes to their credit. Profit does not mean that you know everything; loss does no mean that you know nothing.

Emotions have never been a friend of an investor. Handle them well as they are likely to mislead you in the market, at the most unexpected time, when you are readying to book the profits for the day. One last tempting trade and you stand nowhere. You ignored your business discipline when you tried that trade and succumbed to your emotional decision!

Do not program yourself to lose; you can win. To be a consistent effective trader, respect the rules of trading psychology. Balance your life properly and go to sleep well in time. You need a fresh mind next morning, as you prepare for another day of hectic trading activity. Hectic-it is okay! But let it not be unduly pressurizing! You have a long way to go in the share market. Never develop a feeling that one day you are going to control the market. Nobody has ever controlled it in the past; nobody will, in the future. Only you can understand the present and estimate the future giving due credit to the share market investment discipline!

Never try to define the volatility of the market. It can be the other name for the inefficiency of the market; it can be inefficiency of the investors. It can be the reaction to incomplete information. It can be due to guesswork of some enterprising investors. Volatility has never produced lasting results. It has mostly confused the investors.

In any situation, never forsake trading discipline. That needs to be the permanent companion of your trading psychology. In other areas, you can make adjustments depending upon the prevailing conditions in the market. If you make a principled approach to cut your losses, know that you are a perfect psychologist to tame and win over the market.