Trading decisions are often taken with a rational mindset. However, it wouldn’t be wrong to say that emotions also play a specific role in equity trading or any investment. These emotions are primarily fear or greed. This emotional state of mind is known as trading psychology.
Trading psychology is the ‘X’ factor that sets apart winners from the losers. Whether you are an investor or a stock market broker, here are five traits of trading psychology you need to bear in mind to make the best out of your investments:
1. Acceptance of Market Fluctuations
Markets are random – they can behave anyway, and you can’t accurately predict it. The sooner you accept that markets can go up and down, and there can be bullish or bearish trends, the easier it will be for you to go with the market trends.
2. Knowing That There is No One Size Fits All
Herd mentality never works for anyone. Every investor has a different investment goal and risk appetite. So, stop your search for the perfect trading strategy because it doesn’t exist at all. A strategy differs from one investor to another and is highly vulnerable to market fluctuations.
3. Defining Entry and Exit Signals
Map your entry and exit points, especially in the equity Investment and foreign exchange market. Do not wait for anyone else to tell you when to buy or sell stocks. You should know when to enter a winning position and when to exit to lock the maximum profits.
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4. Ready to Take Risks
If you are a conservative investor, you are better off with a fixed market instrument that gives fixed and assured returns. Winners know that a risk is necessary to get higher returns. They do a careful evaluation of the market trends and patterns and take calculated risks. You truly need to learn to accept the risks.
5. Not Giving into All and Sundry Tips
Several investors will give you endless opinions about what they think about the market. Then, there is also the internet with a plethora of articles on analysis and advice. Listen to all and read all but act only on what you think is right after careful research. Nobody knows your investment or goals better than you.
In fact, it is even better to seek advice from experienced and reputed share market brokers or professional portfolio management companies. They analyze your investment, risk tolerance limit, and future goals to give you the right advice. & provide the equity investment advisor.
Trading psychology runs a lot deeper than you think. The idea is to understand your psychology and how it responds to market trends. This will create a win-win situation and help you to optimize your investments with maximum profits and minimum risk. With practice and experience, you will be able to develop a winning attitude.