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.
- Robert Kiyosaki
- Oliver Velez
The following will be discussed in this lesson:
Stock Trading or Gambling?_________________________________________________________________
The markets are unforgiving, and emotional trading always results in losses. Gamblers have a poor stock market trading psychology.
Theirs is one of sound mind investing.
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.
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.
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.
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.
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 An Ocean
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.
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.
Psychology Of Trading Tool_______________________________________________________________
This was developed by internationally renown stock trading coach Dr. Van K. Tharp.
This eight-part audio series includes interviews conducted by Dr. Tharp on topics such as discipline, mental state control, daily debriefing and many other important discussions that affect a trader's personal psychology.
The following will be discussed in this lesson:
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