Like we have been mentioning in the investment psychology series, mastering the psychological aspects of trading and investing is sure to place you ahead of the rest of the traders. In the previous article, we discussed four extremely crucial psychological as well as trading points you should keep in mind to become successful. In the same pursuit, let us work on the following four points to master some more of the trading psychology which will set you apart.
13) Place numerous bets on low-risk ideas
To pick up right where we left off, it is important for you, as traders, to analyse the risk and reward of every trade you take. Having said that, you can go ahead and invest or trade in numerous low-risk ideas. This way, your capital always stays protected and you are also diversifying your portfolio. This means that you will only end up with multiple gains or small losses.
14) Look down not up
By advising you to look down and not up, we mean that capital protection should be your number one priority. If the potential risk or a trade is high, immediately step away from it. Quickly eroding your capital will not only mean that you can no longer trade but also means that the loss will have a lasting effect on your overall self confidence and general outlook towards taking risks in life.
15) Never trade or invest more than you can reasonably afford
Trading or investing has one very fundamental rule if you want to succeed. NEVER borrow money to trade or invest. Money tends to break even the closest relationships we have. Therefore, the only money you should be using to trade is the money that is dispensable. Before you become a full-time trader, save a small portion of your salary every month. Ensure that your family’s livelihood doesn’t depend on that portion of your salary.
16) Don’t fight the trend
A trend is established only when all the market participants agree that the price has to move up or down considerably. Therefore, it would be unwise to go against an established trend. If you feel like you need to go in the opposite direction of a trend, wait for the trend reversal and use your strategy’s confirmation tools before placing the order.
Although it is easier said than done, mastering investment psychology is crucial for success. In fact, every successful trader attributes his/her success to a psychological balance and composure that he/she gained through years of practice. Therefore, be patient and definitely be kind to yourself in case you make any errors. If you are a humble student of the market, then you are most definitely in for rewards. Happy trading!