To trade the Stock Market successfully its very important to incorporate simple steps for catching every trend. As the winter frost was settling on Wall Street in November 2013, some of the world’s largest and most influential investors were dumping large stocks, among them were Warren Buffet and George Soros. Meanwhile, over 40 million people were watching an online video produced by economist Robert Wiedemer.
The successful market pundit was warning of a pending market tumble with a potential 90 percent drop in market value. Markets often turn on far less influential events. Yet as negative as these events sound, the stock market could still roar ahead. By the time you read this, whether or not the market rose moderately or briskly as the winter snow fell, or plummeted in a sharp decline will be history. The market direction ultimately will be determined not by the gloomy news but how all investors in the market react to it.
The world’s largest investment houses and hedge funds will spend hundreds of millions of dollars on trading psychology software and consulting this year to tell them how to deal with such market unpredictability. Their trading decisions, which move global markets from stocks to foreign exchange each day, are not based solely on market technicals and fundamentals. Understanding that the real market edge is in understanding the psychology of the market, today they compete as fiercely for the thousands of graduates in behavioral finance and behavioral economics as they do for top traders
Psychology of Trading – Trade the Markets with an Edge
Psychology of trading is just as important as understanding how the market works. Many people may not realize just how important it is and how it can really improve your online trading, day trading, and options trading. If you have a good handle on the psychology of trading you can drastically improve and take control of your trading strategies.
As a trader you need to be able to step back from your emotions and to look at your options from a disconnected unemotional point of view. You need to be able to make quick decisions and to stay focused with a certain presence of mind that will keep you in the game. Another huge part of trading psychology is discipline. Any trader knows that they need discipline to know when to step away and when to make their moves.
They also need to be able to stick to any strategies or trading plans that they have already laid out before-hand a large part of being a successful trader is understanding and controlling your emotions. When you know where those emotions are coming from and how to work around them you can make smart decisions rather than acting on impulse which can really cost you when it comes to all types of trading. For example any time your screen starts flashing red when you are online trading you know that the bad news is coming because the stock is going down. Any trader would feel the fear and anxiety that comes when a stock you are trading in goes down however by controlling your fear you can ensure that you do not overreact. When you over react you may be tempted to liquidate your holding and cash out but if you stay calm and work around your anxieties you may find that you can earn some gains. Also by losing you can learn something and better understand how that certain stock fluctuates which you can use to develop a better trading strategy.
By understanding that those feelings of fear and anxiety are normal traders can better work around them and not make snap decisions that could end up costing them more money. A great method that can help alleviate or at least lessen the impact of these emotional responses is for traders to consider how they will react to different situations and to recognize that they are going to have those feelings. They can also develop strategies to calm themselves that will help them have a clearer mind for when they are trading.
Another key part to trading psychology that will help you have an edge on other traders is to recognize that greed is dangerous and will get you nowhere. When you are doing day trading, or options trading, or any other type of trading knowing that being greedy can get you in trouble will help you better manage your trading choices. Any time you think that you can go big and win big make sure you are taking everything in to account and try to recognize if you are just trying to win big to win big. Sometimes developing a trading strategy and sticking to it is the best way to develop and maintain a great portfolio.