▌How to manage emotions? – Trading Psychology


Trading Psychology

☼ Types of emotions in trading psychology

There are three important emotions while trading in stock market. Management of emotions is extremely important in this market of risk and reward. This is as valuable as a good trading system to make consistent profits and avoiding losses in stock market.

► Fear in trading psychology

When we think that price will go against our direction of trade, then there will be a feeling of fear. Because of fear even if we take trade on the basis of our system of trading, we may exit soon with small profit or with loss. This fear will not allow us to follow our system of trade.

► Greed in trading psychology

When we think that price will go in our favor, there will be a feeling of greed. This feeling of greed becomes harmful when our system is giving the signal of exit but we are standing in the market in the hope of more profits and stuck in the trap of fear and greed.

► Patience in trading psychology

This is the solution of the problem of fear and greed. Fear and greed can be easily controlled by this emotion. If we have patience and belief in the system of trading then our actions will become mechanical i.e. free from fear and greed. If we can win patience, then only we can win the stock market with good system of trading.

☼ How do I win the patience?

► I take trade only if my system has generated signal. I see signal, if any, only after 10:30 pm.

► I put stop loss around 10:30am, if my system has ordered me to do so.

► I never consider price fluctuations between 10:00am and 11:30/11:50 pm.

► I book profit or loss strictly as per my system of trading.

► I do not trade MIS products generally.

► I do not trade on the basis of news. I just follow my system of trading.

► I place all my orders on ‘market price’ not on ‘limit price’.

► I decide permitted maximum number of lots, using my Lot-calculator, before trading.

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