TRADING PSYCHOLOGY

TRADING PSYCHOLOGY

SHARE MARKET A GAME OF PSYCHOLOGY:
The stock market is a great game of psychology. One who has learnt to remain balanced and follow the principles with strict discipline can come out a winner. One who loses his nerves will always come out with losses. 95% of the traders belong to the latter category

Indiscipline: If you are not disciplined and cannot follow the rules, do not do this work. It can give you a lot of satisfaction if done in the right manner. On the other hand, it will cause a ruin of your money if you are not disciplined enough to follow the rules.

Impatience: The flower will take its time to grow. In Share Market, impatience is a great enemy. You have to have 6 hours of patience in order to get the results.

Panic: It is human to make mistakes. When a trade goes wrong despite all your understanding and attention, getting dejected will add to the woes. You will like to shut down your computer and stop doing it. This is not the way of the wise. It is possible that you will get an opportunity in the next five minutes. You will not be able to grasp it if you get panicky. Let go of the past and MOVE ON.

Greed: Never make gambling in market, If you use it as a casino, not only you, even your family is going to be ruined.

Boredom: Waiting in front of the terminal can be boring. Get up in between and do stretch. Read books in that time. Do not keep staring at the computer. Look at it in between.

Fatigue: Tiredness sets in seeing the loss. During this period, keep your balance and come out at the right time.

Overtrading: Always remain within the plan. The habit of Overtrading will ruin your capital, sooner or later.

Impulsiveness: â€˜That I have to trade’ will surely lead to losses. This trading compulsion, without properly understanding the market, without getting the opportunity based on the rules, will surely cause havoc. Avoid it altogether.

Over Enthusiasm: When in profit, the mind can get so excited that it will forget to book the profit. Go according to the plan always. You do not have to have targets. You only have to have a plan and you should know when to come out at the most profitable time.

Dejection: you may see your profits getting wiped off in no time because Nifty can come back from a position of profit. You may even see yourself going into a loss for a short duration after seeing some profit. Be patient and follow the plan.

Fickle mindedness: A feeling comes when Nifty goes in the other direction that I have made a mistake. I should come out immediately. I cannot increase the loss and I must come out now. Have patience.

Anticipation and Assumption: Do keep a check on anticipation and assumption. You will see yourself getting into wishful thinking that a breakout is imminent or Nifty is going to follow the International markets or your target will be achieved very soon. The truth is that it will happen when it will happen and the way it will happen. Mostly, you will see the market going in the opposite direction of your anticipation. Be very careful. Trade only when your rules are telling you to do so.

Hesitation/Indecision: When you get that coveted point that you are waiting for, do not hesitate to initiate the move. You may miss several points if you dilly dally.

Missing-the-bus syndrome! There will come endless opportunities in the market. If you miss one for some reasons, there is no reason to keep brooding over it. This will drain your energies. Let go and move on!

Based on the guidance coming from the welcome solutions, following are some of the points that we have to memorize, digest and assimilate in our blood so that we do not make mistakes while trading:

Stock Trading is not about doing the trade. It is much more about not doing it – or about when not to do it.

If you are impulsive, stay away. You will burn your hands.

Wait patiently. You will surely get at least one opportunity a day.

You never miss the bus. This thought that ‘you have missed it’ can cause a big loss. There is always the next opportunity.

Do not initiate a trade before 9.30 am. Watch! Study! Take your time! Then pounce like a tiger!

Overtrading will bring you out of the market sooner than you ever expected. One day gain – two days losses – and you are out!

If you do not book profit at the opportune time and get into the bad habit of ‘more….more’, you will get devastated in this market.

Plans based on assumptions and rumors are going to wreck your nerves.

Follow rules like a soldier. You will never be unsuccessful if you are disciplined.

When in doubt, stay out!

Do not risk your bread and butter. You can only risk jam and jelly.

It is psychology at its best in the share market.

Book profit at the right time. Book loss at the right time.

When the red line is going down fast, it could be an opportunity that you may miss because you get panicky and square off with losses.

Tops and Bottoms are always impermanent.

Dumb Trader buys at the top and Smart Trader buys at the bottom.

Fear and greed need to be overcome by a clear rule-based resolve.

When all experts agree, start ignoring them.

How do they know what is going on in your mind? When you expect it to go down, it will go up. When you want it to go up, they will bring it down.

Rumors are CREATED to trap the credulous. Are you listening?

If you get greedy for more…more…more, you may not even be left with less…less…less. Remember 2008?