Trading is an activity that inevitably generates stress. The investor is indeed immersed in a universe involving certain risks. Nevertheless, it is still possible to put in place strategies to manage these risks. At the same time, you need to have the “right” trader’s psychology. What is it about?
Trader’s psychology? It encompasses all the investor’s feelings. The way he perceives things, the way he experiences situations… But above all the way he reacts to the different events that occur. All this influences success in the trading world. It is essential to master this dimension to become a successful trader.
Emotions and feelings
A trader inevitably feels emotions when he evolves in the world of the stock market. These can be positive or negative and have a definite impact on the quality of the decisions taken. One thing is certain: making a decision based on an emotion is always wrong. Here are some feelings that you need to know how to manage well to avoid mistakes:
- Trust is good, but you shouldn’t be overconfident. When transactions win, there is a tendency to always want to bet more to win even more. However, it is important to respect the initial trading strategy.
- In the same vein, it is possible that the trader is in a particularly good mood and is therefore rather reckless and bold in his speculations. He then takes too many risks and the situation can very quickly turn against him. Being cheerful is therefore not necessarily positive for trading. It is important to keep your feet on the ground and always stick to the trading plan.
- Some of the feelings you need to tame to become a good trader include fear, stress and anger. These are emotions that usually distort judgment and lead to bad decisions. Either we take too many precautions, or we are distracted, or we act (react) on impulses. In any case, it has a negative impact on performance.
In the end, you should never let yourself be guided by your feelings. Moreover, it should be kept in mind that a good decision made before is not necessarily the right one today or tomorrow. Always consider the context of the moment. eToro also offers a guide on trader psychology that we recommend you read.
The importance of self-control
A good trader must be able to control his emotions and feelings at all times. He must remain patient no matter what. Never rush or get impatient. Once a position has been taken, you have to know how to wait and not make hasty decisions. Self-control also means calm and serenity. To remain in this state of mind, it is essential to develop a trading plan to be respected at all costs. In addition, we must be able to remain reasonable, both in terms of decisions and in the use of capital. And all this should not prevent the trader from being prompt in his decision-making. Every second counts in trading.