How Trading Psychology Helps Understanding Of Trading Behaviors And Enhances Performance

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Trading Psychology
How trading psychology helps understanding of trading behaviors and enhances performance
Yiting Yang Professional stock traders deal make dozens of instant decisions daily. They don’t have time to deliberate every buying and selling decisions because making a complex decision could take such a long period of time and expend so much thinking effort that the opportunity could pass before the trader makes his mind up. What they do have, however, is the habit of good trading. Million dollar traders can bring much more profit than mediocre ones because they develop good routines through training and experience. Mediocre traders respond to market signals by animal instinct, easily affected by emotions. The biggest enemy of…show more content…
Watching stocks is like an emotion roller coaster. Average investors are not competent in making smart decisions with the influence of such mood swings. This is why financial consultants advocate for passive investing in stocks in a long term. Essentially, set it and forget it. As we can see, unprocessed emotions push people to make unwise and irrational choices. Therefore, stock traders need to go through rigorous trainings to learn to control their emotions via psychological training. Trading psychology, in essence, is the study of ideal psychological mindset for trading and how we can achieve it.
Human brains are designed to easily overreact to both good news and bad news. As is common in the stock market, stocks appreciate or depreciate in the difference of seconds in a random walk. In order to change this overreaction to adapt to the stock world, we have to change how our minds work.
Making changes to our nature is the first challenge. Obviously we can’t change how our brains are wired, but we can learn to utilize the innate psychological process to our advantage. Since it is virtually impossible for humans to block out emotions, we have to turn emotions into motivation by feeling the need to follow rules.
For example, one of the most important rules, always keep the perspective of the big picture. Although we know that we will make more profit by stepping back and look at the big picture of the market once in
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