Intro...
Many skills are required for trading successfully in the financial markets. They include the abilities to evaluate a company's fundamentals and to determine the direction of a stock's trend. But neither of these technical skills is as important as the trader's mindset.
Containing emotion, thinking quickly, and exercising discipline are components of what we might call trading psychology.
There are two main emotions to understand and keep under control: fear and greed.
Snap Decisions
Traders often have to think fast and make quick decisions, darting in and out of stocks on short notice. To accomplish this, they need a certain presence of mind. They also need the discipline to stick with their own trading plans. and know when to book profits and losses. Emotions simply can't get in the way.
Understanding Fear
When traders get bad news about a certain stock or about the economy in general, they naturally get scared. They may overreact and feel compelled to liquidate their holdings and sit on the cash, refraining from taking any more risks. If they do, they may avoid certain losses but may also miss out on some gains.
Many skills are required for trading successfully in the financial markets. They include the abilities to evaluate a company's fundamentals and to determine the direction of a stock's trend. But neither of these technical skills is as important as the trader's mindset.
Containing emotion, thinking quickly, and exercising discipline are components of what we might call trading psychology.
There are two main emotions to understand and keep under control: fear and greed.
Snap Decisions
Traders often have to think fast and make quick decisions, darting in and out of stocks on short notice. To accomplish this, they need a certain presence of mind. They also need the discipline to stick with their own trading plans. and know when to book profits and losses. Emotions simply can't get in the way.
Understanding Fear
When traders get bad news about a certain stock or about the economy in general, they naturally get scared. They may overreact and feel compelled to liquidate their holdings and sit on the cash, refraining from taking any more risks. If they do, they may avoid certain losses but may also miss out on some gains.
