Psychological approach to trading

Trading on the stock exchange - is a system, especially which includes not only the principles of technical analysis, but also psychological factor. In order to achieve tremendous success, it is necessary to regulate their emotional state, which can cause damage to the trader during active trading. Most traders end their financial career due to the fact that the illusion of movement in the right direction overshadows the harsh reality.

 

The distinctive features of unsystematic approach

 

Most traders make their decision on the basis of intuition and abstract knowledge - it is a fundamental characteristic of haphazard approach. Fragmented use of TA and FA never considered to be a structured system.

 

There are several factors that affect the decision making while trading:

  • the recommendations of the fundamental analysts;
  • independent analysis charts;
  • the advice of friends;
  • analyst news.

 

But since we are all human, emotional factor very often takes precedence over rational thinking, causing irrational actions in the mind of the trader. Interesting is the fact that such action has no explanation, as the situation is in control of our habits and stereotypes that were developed on the basis of existing professional and life experience.

 

It is important to realize that the stock market knows no feelings, and emotional approach always leads to negative results. After all, what worked in real life at hand, leads to a completely opposite result in the stock trading.

 

On a hunch, despite the presence of profitable trades, the shotgun approach will sooner or later lead to large losses even if the trader is not overly emotional man. Profitable trades in this case have only a negative effect on the trader as it has certain positive trade moments may be an illusion that it is functioning properly and eventually will be able to achieve sustainable financial success.

 

Game for intuition confuses many people, causing the phenomenon of gaming addiction, when a trader can't stop trading, despite the large losses, as it periodically does and profitable trade, which it is inspiring and encouraging.

 

But do not be afraid, because many traders will undergo an initial emotional stage and gain a clear understanding of yourself and the necessity of using a systematic approach.

23 December, 2019
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