Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

How to Control Your Emotions when Trading Stocks

New and less experienced traders often forget about the psychological side of trading. Emotions like Fear and greed could turn trading into a miserable experience. You could be excellent in technical and fundamental analysis but when it comes to actual trading execution your performance could be very poor.

The initial excuse often is that it could happen to others but not you. If you just started trading these emotions are not that strong but once you have weeks or months of experience of losing money these emotion will get stronger and stronger and penetrate your mind in a way that they start to control you.

So why do we have fear and greed when we trade? The fear comes from fear of losing money and the fear of your trading system failing. Greed comes from trying to make up for the losses, you want to prove that you are better than anyone else or you simply become irrational.

To control your emotions you have to minimize your fear and control your greed. It’s easier said than accomplished. There is one thing for sure. You can only control both by trading. You have to trade to minimize your fear and control your greed.

There are several things you can do to control your fear:

·      Simplify your system. If you can’t make money on one screen there is no need to trade on four screens.

·      Learn to focus, eliminate any distractions.

·      Analyze your trades, winners and losers.

·      Set a realistic target, as an example you want to make 10% a month (trading options)

·      Look for charts that are easy to understand and use fewer indicators.

·      Look for support and resistance levels.

·      Don’t trade volatile stocks, don’t trade earnings and don’t trade the news.

·      Trade only one security at a time.

·      Paper trade until you can make “money”. If you can’t make money with paper trading you won’t able to make money with real trading.

·      Decide how much you are willing to lose before entering a trade.

·      Set your stop losses.

·      Trade small positions so if you lose it won’t hurt you that much.

·      Use multiple time frames, weekly, daily and hourly charts.

·      Check your entry points. If it’s a good entry point on the daily chart make sure that it’s a good entry point on the hourly chart as well.

·      Imagine what you expect the security to do during the trade. If it doesn’t do what you expected exit the trade.

There are also several things you can do to control your greed:

·      Be realistic.

·      Set your goal and once you reach it exit the trade and stop checking that stock afterwards.

·      Once you reached your target take a break and be able to relax.

·      Don’t trade the news or any other events.

·      Don’t trade volatile stocks.

·      Look for support and resistance levels.




This post first appeared on Smart Trading Ideas - Home, please read the originial post: here

Share the post

How to Control Your Emotions when Trading Stocks

×

Subscribe to Smart Trading Ideas - Home

Get updates delivered right to your inbox!

Thank you for your subscription

×