Psychology During Trading

Psychology During Trading

Psychology during trading itself refers to our behavior and reactions in real-time when we are active in the market. In this period (when we are directly engaged in trading), we can experience a wide range of strong emotions that can seriously impact our decision-making.

1.     Emotions you may experience during trading:

·        Medo: It is one of the most common emotions traders experience. We may fear losing money, which can result in prematurely closing trades.

·        Ganância: Greed can lead to excessive risk and reckless decisions. Traders may be tempted to trade positions that are too large or to open trades too frequently in the hope of a quick profit.

 

a.     How to deal with psychology during trading:

·        Maintain discipline: It is important to have a clearly defined trading plan and follow it regardless of what happens in the market.

·        Manage emotions: The key is to learn to pause, step back, stay calm, and take a break—even for several days if needed.

·        Avoid impulsive decisions: Impulsive reactions to market movements can be very dangerous. Before making a decision, we should always ask ourselves: "Do I have the right confirmations? Is this trade in line with my trading plan?"

 

2. Why psychology is key in trading

Psychology in trading is vital because the market is unpredictable, and trading is not just about technical skills (but also about how we adapt to our emotions). Even with a strong trading plan, if we cannot control our emotions, we will not be able to successfully implement that plan.

 

         3. Key qualities to focus on to become a great trader

Successful traders are not only those with the best technical or fundamental knowledge. Key qualities a trader needs include:

·        Patience: Trading is not about quick profits. It is a long-term process that requires time and patience. A trader must know how to wait for the right moment and avoid reacting impulsively.

·        Discipline: The ability to stick to a trading plan and not be swayed by momentary emotions is necessary. Discipline also involves proper risk management and regularly reviewing trades.

·        Confidence and humility: Confidence is important, but humility is more important. A trader must believe in their abilities while acknowledging that markets are unpredictable and no strategy is 100% guaranteed.

·        Emotional resilience: After a loss, it is important you're able to get back up and not take it personally. This approach can help you maintain a healthy perspective on trading and allows you to learn from mistakes.

 

       4. How to learn to handle losses

Losses in trading must always be expected because they are part of the process, so it is paramount to learn how to handle them properly.

·        Set realistic goals: From the start, you must accept that losses will happen. By setting realistic expectations, you can create a plan to deal with them without being overwhelmed.

·        Set a stop loss: Every trader should clearly understand how much they are willing to risk or lose. A stop-loss helps limit losses to an acceptable level.

·        Long-term perspective: Do not focus on a single loss or a single win. Try to see trading as a long term process where the goal is to learn from mistakes and continually improve.