Trading PsychologyUnderstanding Trading Psychology to Prevent Emotional Rollercoaster
In trading, the market is your friend and your emotion is your biggest enemy. It is what goes on your mind that determines your success. Understand trading psychology helps you to better manage your emotion and execute a good trade.
This is the holy grail but very few people can follow this simple route. The emotion burden of risking one's money is immense - especially when you're in a losing position. One of the reasons why even very few institution traders became successful as individual traders - the feeling of risking other people's money is different from risking your own money. One tends to make bigger mistakes when dealing with own money.
In order to harden your emotion - the best method is feel the pain early by losing first and recover quickly from the pain and loss. Relate this to a young boy who would not touch a kettle with his bare hand if he has been burnt by a boiling hot kettle and learnt a lesson.
So go get yourself "burnt" - and make sure you have your first-aid box nearby. Learn from the mistakes. Then go grab a couple of good books on psychology of trading - you will understand these books better and do the right things recommended by experienced traders. One of my favourite authors on this topic is Dr Alexander Elder. His book, “Trading for a Living”, is suitable for people who do not want to get "burnt" again.
