The reason why 95% of retail traders fail is more often than not, only about their trading psychology than their technique or strategy. However, the importance of strategy and good risk management cannot be dismissed. In this series of investment psychology, we aim to cover the important topics outlined by Martin J.Pring in his book, ‘Investment Psychology Explained’.
1) When In Doubt Stay Out
Never enter a trade when you are not sure of the direction. While it is okay to experiment with a smaller capital at the beginning of your trading journey, it would be unwise to make this mistake when you are taking trading as a full-time career.
2) Never Invest Or Trade Based On Hope
We, humans, are nothing without hope. But any successful trader will ask you to leave your hopes and other emotions at the door. The key is to stick to a stop loss and target percentage. Be systematic and not hopeful about your trades and you will be more emotionally free to make more profits.
3) Act on Your Own Judgment Or Else Absolutely And Entirely On The Judgment Of Others
In India, you will come across several “expert” call givers who are somehow focussed more on “helping” others than making profits with their own strategy. Be extremely wary of them. We would suggest that you take your own personal calls and device your own strategy instead of falling for scams.
4) Buy Low (Into Weakness), Sell High (Into Strength)
The market is all about finding the equilibrium price which seems fair to both buyers and sellers. If the price forms a divergence on either side, it can exhibit strength or weakness. If the price is on the lower side of the equilibrium, we suggest that you buy the stock there and sell it when it reaches the high strength point of above the equilibrium.
Stay tuned to this space for more on trading psychology by the experts. When you conquer your mind, you conquer your trade. Happy trading.