In our investment psychology series, the previous article covered the first four trading psychology concepts covered by Martin J. Pring. Although every individual is different, trading and investing require a specific set of mental strength to become successful. Let’s understand the next set of mind rules which you need to incorporate to become a relaxed and profitable trader.
5) Don’t overtrade
Most new traders might get carried away with multiple profits and might place new orders hoping for more profits. Not only could these trades make losses, but these could also eat away any profit that you previously made. On the other hand, a trader who has been making losses might be tempted to rectify that by placing more orders, hoping to turn them into profits. We strongly suggest that you do not give in to either temptation. The minute your target percentage for the day has been achieved, or stop-loss has been hit, close your trades and move on to other activities. Overtrading has a notorious history of never being in our favour.
6) After a successful and profitable trading campaign, take a trading vacation
It is important to rest yourself after a successful trading session. We all know that trading takes a mental and emotional toll on our psyche. Taking a break from trading can go a long way in reducing the mental pressure you undergo. Therefore, take a break from trading once in a while and get back to it with a rejuvenated mind.
7) Take periodic mental inventory to check how you are doing
Like we mentioned before, trading is a mental game. The stronger you are mentally, the longer you will last in this career. Therefore, it is important to take a step back once in a while and do an audit of sorts on your mental health. Ensure that you are not addicted to trading and pay a visit to a psychologist or if you feel that you are in need of professional help.
8) Constantly analyze your mistakes
Businesses these days are taking a ‘lean’ approach to how they develop their products and services. This means that they have a tight feedback loop in place, using which they can to analyze their mistakes and come up with better solutions. Using the lean approach to trading means that you are constantly working on your mistakes and ensuring that you don’t leave any of your trades up to chance.
The points that we have covered are extremely crucial to ensure that you are successful in your trading career. Make some time to completely incorporate these into your trading style and you will notice that irrespective of profits and losses, you will be more at peace instead of reacting to every small difference.