March 19, 2018

How "Psychology" and "Stop Loss" are important to Investment

Stock Market Data - A city worker Analysing stock market data on a monitor.

When it comes to Investment, people always talk about traders’ emotions and psychology status. But do you know how they are related?

It’s important to know how to identify an emotional traitor.

When trading emotionally you’ll be nervous and tense your sweat and will be very hesitant.

If you notice the symptoms occurring, stop everything you cannot be an effective trader in the state, get away from the computer, have a glass of cold water, make a strong cup of coffee and try by all means necessary to disconnect from what’s going on in your computer at the moment.

Music and meditation also possible whatever will help you disconnect and calm down.

If it sounds irrational to just go and leave everything in the middle of a losing trade, but you can’t influence the market trend and you can’t take a calculated and logical action in the state.

So best to relax till only event when you will be able to come back and trade effectively.

Fear is your enemy

One of the most important rules on trading, is to trade calmly and rationally.

Don’t let your emotions take over and divert from your chosen strategy.

If you need to change plans it’s very important to change under enough understanding and calm, regarding your substitute plan, rather than from a place of Fear and confusion.

The indecision of fear is the best way to insure a repeated losses.

Exiting Losing Trades

Traders tend to stay in losing trades, because as long as they haven’t exited their trades, the loss is still only a paper and is not yet become real.

The moment you leave the trade the loss is realized and the money is gone.

Traders learned to take real losses will be wise enough to exit failed trades early in the plan and move onto other trades, which shall have higher chances of success.

Stop Loss is Very Important

A “Stop Loss” command is a command that automatically closes the trade when your losses exceed a predetermined level.

“Stop Loss” command exists in order to protect you from uncontrolled losses.

Make sure to use it. Proper use of this command will help you among other benefits to overcome the problem of recognizing losses.

Many Traders think it’s sufficient to make a stop loss order to themselves and promise themselves will act on it.

However most traders don’t actually abide by this commitment which is why it’s really important to actually enter the command into the platform.

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