Stock Market Trading Psychology: Developing The Stock Traders Mindset
And so you are thinking...stock market trading psychology, what on earth are you talking about? Well, the stock market can be a very hard game.
Knowledge of stock market trading psychology is not only a definite asset to be successful in the game, but it is the most important aspect of the game.
"Financial intelligence is 90% Emotional IQ and 10% Technical IQ. What determines what we do and who we are, is how we individually respond to our emotions".
- Robert Kyiosaki
"We don't trade stocks, we trade people"
- Oliver Velez
"Investment success requires internal control more than any other factor. This is the first step toward trading success. People who dedicate themselves to developing that control are the ones who will ultimately succeed".
- Dr. Van K. Tharp
The following will be discussed in this lesson:
Stock Trading or Gambling?
Unfortunately, stock trading often appeals to gamblers and impulsive people. If you trade for the excitement, you are liable to make trades with bad odds and accept unnecessary risks.
The markets are unforgiving, and emotional trading always results in losses. Gamblers have a poor stock market trading psychology.
Gamblers feel happy when trades go in their favor. They feel terrible when they lose. While a successful stock trader professional will focus on long-term plans and do not get particularly upset or excited in the process of trading.
Theirs is one of sound mind investing.
Professional stock trader and Psychiatrist Dr. Alexander Elder states in his book Trading For A Living: Psychology, Trading Tactics, Money Management:
"After practicing psychiatry for many years, I became convinced that most failures in life are due to self-sabotage. We fail in our professional, personal and business affairs not because of stupidity or incompetence, but to fulfill an unconscious wish to fail."
You need to be aware of your tendency to sabotage yourself. Stop blaming your losses on bad luck or on others, and take responsibility for the results. This is proper stock trading psychology.
Start keeping a diary - a record of all your trades, with reasons for entering and exiting them. Look for repetitive patterns of success and failure. Those who do not learn from the past are condemned to repeat it.
Your feelings have an immediate impact on your trading account. You may have an incredible trading system, but if you FEEL frightened, arrogant, or upset, your account is sure to suffer. When you recognize that a gambler's high or fear is clouding your mind, STOP TRADING!
Your success or failure as a trader depends on controlling your emotions.
One of the best books ever written on stock market trading psychology, is called Trading In The Zone by Mark Douglas.
The content of the book addresses the psychological attitude that is an absolute must to becoming a competent and consistent stock trader.
From the basic explanation of why we do to defining the problems and finally showing what action you need to take in order to set you on the path to confident trading at the mental level.
When you trade, you will be competing against the sharpest minds in the world.
The field on which you compete has been tilted to ensure your failure. If you allow your emotions to interfere with your trading, the battle is over before it has begun.
Having a good stock trading system is not enough. Most Traders with good systems wash out of the markets because psychologically they are not prepared to win.
They do not have the proper stock market trading psychology mindset.
Most amateurs will feel like geniuses after a winning streak. Traders gain some knowledge, they win, their emotions kick in, and they self-destruct. They give back all their profits to the markets.
Profits make traders feel powerful and give them an emotional high. They try to get high again, put on reckless trades, and give back their profits.
Many stock traders cannot stand the pain of a string of severe losses. They die as traders after hitting rock bottom. You may have to devote as much energy to analyzing yourself as you do to analyzing the markets.
The few surviving traders realize that the main trouble is not with their methods, the trouble is with their thinking.
They, and you, can change and become a successful stock trader, but you must develop your stock market trading psychology.
Psychology Trading Tool
An awesome tool for developing your Stock Trading mind set is called Trading Mind.
This CD teaches you the psychological tools and techniques that you need to transform you into a professional and successful stock trader.
This trading series will help you to:
- Develop a winning mindset based on the mental/emotional rules of a winning stock trader
- Eliminate the emotions that can sabotage your success
- Eliminate fear, doubt and hesitation
- Reduce the stress associated with stock market trading gains and losses
- Visualize Success like a champion stock trader
And because it's on CD, you can easily pop it into your CD player and listen while driving in your car.
Click Here to Learn More
Losers feel the urge to trade, just as alcoholics feel the urge to drink. They make impulsive trades, go on trading binges, and try to trade their way out of a hole.
A loser is like an alcoholic who does not want to know how many ounces of liquor he drank. You have to change how you think in order to stop losing and begin your recovery as a trader. An alcoholic needs to admit that he cannot control his drinking.
A stock trader needs to admit that he cannot control his losses. He needs to admit that he has a psychological problem with losses and needs to develop the proper stock market traders psychology mindset.
The stock market is like the ocean - it moves up and down regardless of what you want.
Your success and failure depends on your thoughts and feelings. It depends on your attitudes toward profit and risk, fear and greed, and how you handle the excitement of trading and risk.
To be a winner in the stock market, you must know yourself and act calmly and responsibly.
The stock market does not know you exist. You can do nothing to influence it. You can only control your behaviors. This is all part of having the correct stock market trading psychology.
A sailor cannot control the ocean, but he can control himself. He studies currents and weather patterns. He learns safe sailing techniques and gains experience. He knows when to sail and when to stay in the harbor. A successful sailor uses his intelligence.
I know what you are thinking, if I want to learn the psychology of trading...wouldn't it be great to interview some of the great stock market traders, to find out how they think and what makes them tick?...
Guess what? It's already been done. A fellow by the name of Jack D. Schwager did such that, and wrote a book called Market Wizards.
If you would like insights into the thought processes,trading rules and the stock trading psychology of highly successful traders, get this book...it's outstanding!
A professional trader uses his head and stays calm. Only amateurs become excited or depressed because of their trades. Emotional reactions are a luxury that you cannot afford in the stock markets.
Acting out of anger, fear, or elation destroys your chance of success. You have to analyze your behavior instead of acting out on your feelings.
This is sound mind investing.
The following will be discussed in this lesson:
Recommended Stock Trading Psychology Products and Tools
Mental/Emotional Training For Traders In Ten Easy Lessons!
Develop a Winning Mindset Based on the Mental/Emotional Rules of a Winning Trader
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