Becoming a better day trader requires that you not only focus on textbook knowledge but also yourself. This is why it is so important to put some focus on trading psychology.
1. Know Your Strengths – Knowing your strengths is a crucial part of trading. It’s important to focus on what you are good at so that you may focus your attention in that area.
2. Develop Confidence – Developing confidence not only removes some of the stress from trading, but it also allows you to become more competent.
3. Know when you need to take a break – Day trading can be stressful at times. It’s okay to take a break now and then. This gives you time to refresh and come back to the market with a better mental state.
4. Become self-aware – The ultimate goal of all of these lessons in trading psychology is to help you become more self-aware. If you are not self-aware, you cannot make the changes necessary to improve.
5. Learn to change – Oftentimes, changing requires that you leave your comfort zone. That being said, if you want different results, you have to make changes.
6. Control your environment – Both physical and mental cues within your environment can have a profound effect on your trading. Focus on finding the ideal environment for trading.
7. Think in Probabilities - This is by far the most important part of trading psychology that is not taught anywhere. Successful traders think in probabilities before taking every trade, they do not commit to the market fully, they accept the loses if the trade did not go their way and take the next trade without any hesitation.
8. Deal with stress – Trading under stressful conditions is a recipe for disaster. You should find a way to deal with stress so you can avoid trading under less than ideal conditions.
9. Pinpoint your emotions – A big part of the trading process is understanding the emotions that trigger your actions. For example, let’s say you stop out of a move early even though your initial prediction ended up being correct in the long run. What caused this? Did you make this decision out of fear? Did you buy too many shares? Did you lack the self-confidence to follow through with your plan? Figure out the emotion that triggered your behaviour and look for a way to combat this emotion in the future.
10. Develop a routine – Develop a routine and stick to it. The repetitiveness of this routine will create a sense of stability and increase your trading performance.
Trading in probabilities is not focusing on a loss or win of a single trade and believing in your trading plan for the long run.
A lot of times, what happens to people, sort of what separates the good from the professionals is that the good know the right answer, but they don’t follow through with it because it’s too scary and they think the risk is too big. They don’t have that confidence that it’s okay because while there might be some variance to the results and you might lose on this particular trade, mathematically it was the right choice. Over the long run, it will work out. This is the difference between a beginning trader and a professional – they think in probabilities. They are comfortable with uncertainty because they trust the process.
eg. If you have a trading plan and it works or gives you a 70% win rate, and assuming you stick to this plan, you now have your edge over the market. But you don't know what the sequence will be of your wins. first 3 can be losses and then you may get the 7 wins in a row. You have to accept your losses and be realistic and stick to your edge (strategy).
PranamGhagare
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@nitesh.nagdev,
I suggest you read Trading in the Zone by Mark Douglas. It will help your trading a lot.
nitesh.nagdev
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@PranamGhagare, thanks
what kind of things u should see when u think in terms of probabilities like win/loss ratio
as i see my reading r correct but trading in terms of probabilities i think i fell to learn alot