Have you ever wondered why some traders are very profitable, some are mildly profitable, and some so often fail. Can this success or lack thereof be blamed on the individual, the trading strategy or the chosen trading plan/system.
Many individuals would blame the trading strategy or plan rather than taking personal responsibility. So this opens up the all important question. Is it the strategy or the individual trader?
You can purchase any number of trading education systems that are available on the market at the moment or read every book on trading you can get your hands on but in reality if you are unable to control you emotions while trading you will have a hard time becoming a successful and profitable trader.
There are two main emotions that drive the market. FEAR and GREED. As traders it is how we react to these emotions that will determine our trading performance. Both emotions will drive our action, therefore how we act determines the outcome of the trade whether it be profitable or not.
How many times have we experienced a number of consecutive losses in our trading and immediately start doubting our capabilities, our trading plan or even our trading strategy. We are in a state of fear. Fear of losing our money, fear of making a wrong decision, and fear of entering another losing trade. We also question why our trading plan is now not working as well as it has in the past.
On the reverse side, when we experience a run of profitable trades we begin to feel invincible. We profess we have the perfect trading plan. Over confidence can set in and we can start to over trade, or even commit more capital to the market to increase our profits. Some may also start to tweak their trading plan in an attempt to increase profits.
A strong discipline is required to follow any trading system. It is discipline that will determine how you react to the emotional fear and greed, and discipline will also etermine how profitable you will be in the market.
As a trader ask yourself this question – ‘once I have reached my profit target can I close the trade even if I think the market may go higher and there could be more profit available?’
So remember to master your discipline and when the old fear and greed monster appears you will have the strength and confidence to stick to your trading plan and become a successful and profitable trader.
Take care,
Stock Trading Mum
