PSYCHOLOGY BEHIND TRADING
Managing intrusive thoughts is vital for traders as they affect decision-making. Psychological intervention offers strategies to cope, enhancing focus and clarity. Prioritizing mental well-being is essential for long-term trading success.
Biased Trading
Representative Bias: Traders may rely too heavily on past successes without proper analysis, assuming they will repeat.
Negativity Bias: There's a tendency to focus on the downsides of trades rather than recognizing successes.
Status Quo Bias: Traders often stick to familiar strategies even as markets evolve, resisting necessary changes.
*This has happened to me many times, where I refuse to apply new strategies to the evolved market
Confirmation Bias: This bias leads traders to prioritize information that confirms their existing beliefs while ignoring contradictory evidence.
Tips to avoid emotional based trading
-
Identify your personality trait: Understanding your own trading psychology can help you tailor strategies that best suit your temperament.
-
Follow a trading plan: Having a well-defined trading plan helps maintain discipline and reduces impulsive decisions.
-
Be patient: Patience is crucial in trading to wait for the right opportunities and avoid overtrading.
-
Take a break after a loss: This can prevent rash decisions and allow time to reassess your strategy.
-
Be ready for changes: Markets are dynamic, and flexibility in strategies can enhance your ability to adapt.
-
Accept & acknowledge your wins: Celebrating successes can reinforce positive trading habits.
-
Keep a trading journal: Recording trades and strategies improves learning and accountability in trading.