If you are someone just entering the market and worried about the psychological aspect of trading and wondering about how successful traders approach it, this blog is for you. We will be taking a look at ways and tips to make sure your emotions and thoughts don’t hold you back and make the most of the opportunities the market offers you. Let’s get right into it.
A healthy state of mind
The first thing to do here is identify what is a helpful mindset to trade with and what is harmful. Most emotions, if not all, are harmful when making financial decisions. Usually we distinguish between emotions on the basis of ‘positive’ and ‘negative’.
Positive emotions are categorized as being those that make you feel good and hopeful. Joy, curiosity, excitement all fall under this category.
Negative emotions are categorized as being those that make you feel bad and depressed. Anger, sadness, frustration, jealousy all fall under this category.
In trading all emotions, whether they are positive or negative, are harmful. Yes, you heard that right. Sometimes even the positive emotions such as hope, excitement, or curiosity can lead to making harmful decisions too.
Why are emotions discouraged?
The simple answer to this pressing question is that they cloud the trader’s judgment. Feeling emotional will mean that you are not thinking rationally and thus not making a decision because it is logically sound but because it is what you want to do.
It gives precedence to the heart over the mind.
So, now that we have identified the problem, let’s see if there are actionable steps that you can take to resolve it.
Tips to be strong psychologically
1. Identifying your mental state
Being aware of what you are feeling is the first step. Before taking a decision, take a step back and think about why you’re taking it.
Is it because it is the safe thing to do and is in line with your strategy? Or are you taking that decision because you think you want to make more profit than what you initially set out to make? Is it a smart financial move or plain old greed?
These are all things you need to be asking yourself. These are your first steps towards self-awareness.
You can’t combat something you are not even aware of. In fact the only way to guard against a threat is to be aware when it is near.
This is why self-awareness iskey to maintaining a stable mindset.