10 Techniques for a Good Stock Trading Mindset

1. Have self-confidence:

Having an optimistic attitude will be key to success in your trading because having a pessimistic attitude will be detrimental. It will lead to a self-fulfilling prophecy where you may become hesitant with every decision. The optimistic attitude is aware that not every trade will turn out well but that successful trades will follow.

2. Make Snappy Decisions:

When making decisions, you’ll need to be fast and decisive because you don’t want to let your emotions get in the way. Stay focused as you stick to your plans and be ready to book your profits and losses.

3. Be in control of your emotions:

Never get too excited or distressed about a certain trade. Even though you may have lost money from a losing trade it doesn’t mean it was a bad trade. Good trades are never defined by winning or losing.

4. Being Aware and Making Careful Decisions:

While being snappy and decisive is needed, it doesn’t mean you can be reckless about your trades. The best traders are always aware of the risks that they are taking as they have calculated the risks and awards before they enter any trade.

5. Handling and Addressing Your Fears:

Among traders, fear is one of the two emotions that plague them the most (the other one is greed). It is natural to be fearful whenever bad news about trades or stocks hit. But being aware of that fear and controlling it will be instrumental in your future trading. If you let your fear control you, you may miss out on trades that may become successful. Consider your fears before any bad news breaks, it will help you plan and react to any bad news accordingly.

6. Rational Thinking and Handling Greed:

With greed, some traders may hold on to a winning trade for too long and try to eat up every single tick of profit. Eventually, those who are greedy will be exposed once the trend reverses. This is where rational thinking comes into play because it helps traders overcome their greed and use that to base their decisions on whether to hold on or let go of a trade.

7. Setting Your Own Rules:

Every trader has a set of rules that they created for themselves. They follow these rules when they enter or exit any trades. Having these based on your risk-reward tolerance will help you set up goals. These rules help you know when you have reached your goals, hit your limit for wins/losses, and when to enter or leave a trade.

8. Review Your Performances Frequently and Be Flexible:

Reviewing your performances will help you know what you are good at and what you need to improve upon. This will help you understand yourself and prepare to take in new suggestions for the future. Being flexible means you’ll be able to practice and look at things objectively. This technique will help you throw away ideas that didn’t work and keep your ego in check.

9. Keeping Up With the Trends:

Good traders always keep up with the news of the industries they want to be a part of. Not only that, but they also gather any information about that industry and attend any seminars/conferences available. This will promote traders to review their performances and become flexible with their trades.

10. Understand that the Market is Unpredictable:

You will never know how things will turn out in the market and traders are aware of this fact. Traders with a good mindset will often adjust their trading position once they start to notice if their trading position isn’t going to turn out well. However, the traders with a bad mindset will often stay on a losing trade for too long because they want to find out if they will be right. Ultimately, this can lead to losing trades.

Conclusion:

Here’s an example; two new traders, Evelyn and Jack. Evelyn is off to a good start in her trading. She formulated a Trading Plan, continually assesses her trading performance, writes down her successes and failures, keeps up with the latest market news, and strives to continually improve. The results come in showing Evelyn’s progress and success through her hard work.

References:

CFI. (2020, April 14). How to Think Like a Trader — Developing a Winning Trading Mindset. Retrieved November 13, 2020, from https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/winning-mindset-of-a-trader/

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Zivolve

Zivolve

An A.I. Trading and investments assistant application aims to empower individuals to be in charge of their trades and investment portfolio in a hands-on fashion