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Trading Psychology

Newbie's Corner - Confidence about tradingOnce a newbie trader becomes an experienced newbie trader with knowledge, why he is still struggling in trading? With good trading strategies, good trade setups, and technical knowledge about indicators, he will be trading with confidence. But why he is not having confidence? I will explain two important factors here. First one is the expectation of holy grail strategy or trade setup. This type of expectation comes when a person is not ready to understand that 100% success trades are not possible. People who have this type of expectation will follow one strategy for some time, then switch to another one when they get few losing trades. They spend their money, time and energy in finding new strategies & testing it for some time before finding some other new strategy. Next factor is not having sufficient understanding about the strategy or trade setup. It makes a trader to lose interest on his strategy once he encounters few losing trades. The solution to trade confidently lies in back testing. Usually professional traders back test their strategy at least for the past 4 yrs. This makes them to understand how their strategy works in different market situation and to know the trading edge. Have you back tested your strategy? If not now is the time for back testing...
NSE:CNXMETALEducation
by vanathi
13
Trader's Queries - Capital requirement for tradingQuery : How much capital is needed to trade? This is one of the most frequently asked query from new traders. I have seen people who have the opinion, “50 Lakh or one crore capital make trading safe & secure”, “only people who have capital more than 50 Lakh only earn money from trading” etc. Its true that without capital we cannot start any business. Its also true that we don’t need 50 L to one crore to start any business. Trading is a business. Its the only business which has the capacity to give us unlimited profit. To reach that level of gaining “unlimited profit”, a trader has to make him qualified. So when a trader is preparing himself to become a “pro trader”, he has to start with the amount he can afford to lose. Meaning, a person should not borrow or get loan to trade. The capital should not make a person sad or depressed if he lose his entire capital. Remember, a trader won’t gamble if he treats trading as a business instead of casino. Understanding this is the key for your success in trading.
NSE:CNXITEducation
by vanathi
11
Consistent Trader - Chapter 4Lets start this week’s chapter with the story of “rabbit & tortoise” Rabbit & tortoise decided to have a running race. Race 1 : In between the race rabbit slept & tortoise won. Moral of race 1 : You should take continuous efforts to become a successful trader. Race 2 : This time rabbit did not sleep and won. Moral of race 2 : No strategy will work 100%. Accept that fact. Race 3 : Tortoise wanted to win the race & changed the strategy. So it challenged the rabbit to reach the other side of the river. Rabbit ran along the border of the river & took more time to reach the other side. Tortoise just swam across the river & reached the other side. Tortoise won. Moral of race 3 : Select the strategy as per the market situation. Adapt fast when market structure changes. Race 4 : Both rabbit & tortoise became friends. They decided to take turns in winning the races. Moral of race 4 : Success/profit will sustain when there is no or less ego. In trading when your stop got hit, accept it & close the trade. Dont do revenge trading. Think different than other traders to be profitable. Profit does not depend on fancy indicators or techniques. It depends on how you manage your emotions during trading & execute the trade. The rabbit had good speed, but in race 1 it lost because of wrong execution. Similarly a good strategy or good trade set up which is not executed properly can take away your profit. (To be continued next week...)
NSE:CNXMETALEducation
by vanathi
6
Consistent Trader - Chapter 3Market structure keep on changing as per the participants mindset and sentiment. The way a trader handles his trade changes according to that For example, if you are driving in a highway, you can drive fast. Inside the city you are not allowed to drive fast. Similarly, according to the market structure you have to use your trading strategy, risk management and trade management. Sticking to one strategy in all market conditions wont make a trader money. Understanding market structure comes by experience, but developing it depends on the trader’s flexibility. For example in an extreme bullish market, buying when the price breaks the resistance is right and profitable. In normal bullish market, buying at the support is profitable. Because of over confidence about his strategy and believing his strategy is a holy grail an intermediate level trader applies the same strategy in all market conditions (Please refer to chapter – 1 to know about intermediate level trader). Are you struck with one strategy or one trading style? Do you believe your strategy is supreme? Well it is time for you to rethink about it now. (To be continued next week...)
NSE:CNXMETALEducation
by vanathi
15
MARKEY CYCLES PSYCHOLOGY | EMOTIONS & COGNITIVE BIASES All markets go through cycles of expansion and contraction. 📈When a market is in an expansion phase (an uptrend), there is a sentiment of optimism, belief, and greed. Typically, these are the main emotions that lead to a strong buying activity. Sometimes, a strong sense of greed and belief overtakes the market in such a way that a financial bubble can form. In such a scenario, many investors become irrational, losing sight of the actual value and buying an asset only because they believe the market will continue to rise. They get greedy and irrational by the impressive bullish movement, expecting to make huge profits. As the market gets heavily overbought, the local top is created. In general, this is considered to be the point of the highest risk. In some cases, the market will start a sideways movement while smart money steadily sells the asset. This is also called the distribution stage. However, some markets don't present a clear distribution stage, and the downtrend starts sharply after the top is reached. ➖➖➖➖➖➖➖➖➖ 📉 When the market starts reversing, the euphoric mood can quickly turn into complacency, as many traders refuse to admit that the uptrend came to an end. As prices continue to fall, the market sentiment quickly moves to the bearish side. It often includes feelings of anxiety, denial, and panic. In this context, by the anxiety we mean the moment when bullish biased market participants start to question why the price is falling, which soon leads to the denial stage. The denial period is marked by a sense of unacceptance. Many investors keep holding their losing positions, either because "it's too late to sell" or because they want still believe that "the market will come back soon." But as the prices drop even lower, the selling wave gets stronger. At this point, fear and panic often lead to what is called a market capitulation (when holders give up and sell their assets close to the local bottom). Eventually, the downtrend stops as the volatility decreases and the market stabilizes. Typically, the market experiences sideways movements before feelings of hope and optimism start arising again. Such a sideways period is called the accumulation stage. ❤️Please, support this idea with a like and comment!❤️ ⬇️Subscribe to my social networks!⬇️
OANDA:XAUUSDEducation
by VasilyTrader
2
Trader's Mindset !The Pyramid showing how successful traders identifies their strength in the world of professional trading. Numbers may not be the perfect one but the idea behind this pyramid is to understand that most people spend most of their time in finding the best strategy which we know that does not exist. Strategy : - The top of the pyramid is strategy, which is really important but not as much as we think. off course we have to have a rule for entry, exit, and take profit. Risk Management: - We put risk management in the middle of the pyramid which shows that this is the 2nd most important thing that needs to be discussed. We must control our risk on each and every trade. Mindset/Psychology: So, we have put the trading psychology in the bottom of pyramid which means the trader's mindset is the foundation of his/her successful trading career. This trading education series around these three pillars will be continued ........ :)
OANDA:XAUUSDEducation
by thebullstreet07
Consistent Trader - Chapter 2Market is dynamic. You cannot predict market will behave in a certain way. Market movement is based on probability and your trading reflects it. The price movement gives the information about the trend. From that we form perception/view about market. Our perception is the basis for the trading. Changing the perception becomes a problem for some people. For example “Person A” has bullish view about the market before it opens. Market opened gap up and shows the sign of reversal. If “Person A” do not change his perception by understanding the reversal signs, he will lose money. Similarly changing the view often is also not good. If you change your view about the trend for each and every candle formation, then you won’t get clarity about market trend. Now lets come to the important point. How to overcome it? Have high probability trade set ups and trading strategies. Trade only when your trade set ups form. You will have more clarity and confidence when you follow the tested trade set ups and trading strategies. Do you want to reduce the intermediate phase duration? Avoid taking random trades. Always have a plan about handling market movements. Once the market opens, your emotions will be highlighted and at that time processing the information, planning the trade and deciding what to do becomes tough. How you perceive the market with your trade setups and trading strategy decides your success. (To be continued next week...)
NSE:CNXMETALEducation
by vanathi
14
Know When To Stop Trading !!!!🎯When to Stop Trading? We have spoken up to now about when to stop trading on a particular day. However, it is important to know if you should stop trading altogether – in other words, quit. It is not simple to find the right time to quit because often people quit when the going gets tough, but this may be just before success arrives. However, there are times when quitting is important: --You can’t see any possible positive outcome for a trading --You constantly feel overwhelmed and negative about your trading --Trading takes preference over your health or your family --Your financial situation is negatively impacted by your trading so that your family is suffering or your mental health is impacted. These are all red flags. At a minimum, take a break from trading in order to rest, relax and recharge. Save up some trading capital, assess your goals and reflect on your failures and successes. Use this to formulate a new trading strategy, while working on your perspective and objectivity. You may then be ready to try again. The markets are certainly not going anywhere if you need a break and quitting does not need to be forever.
NSE:NIFTYEducation
by ReviveTraders
6
Stair Steps Pattern | ULTRACEMCO 🎯The stair steps pattern overview The stair steps pattern forms along with the trend .It shows an uptrend where the price rises and falls abruptly. The graph reminds the stairs, thus a name of the pattern In the uptrend, you may notice long consecutive bullish candles. Then, the price adjustment takes place and the cycle starts all over again. The price correction areas create new levels of resistance which soon will be broken again so the uptrend continues. Best of luck!
NSE:ULTRACEMCO1!Education
by ReviveTraders
57
Trader's Queries - Trading Index OptionsThis is one of the most asked queries. It resembles the doubt in many newbie traders mind. Query: I have a small capital “Y” amount. If I trade in stocks, my profit will be 0.1 to 0.5 % of my capital. But index options are cheap. And it has the potential of giving more than 10% profit of my capital in few trades. But I keep on losing money. What to do? Let us see the different scenarios. Factors to consider: Understanding the price movement. Emotional balance. Flexibility and adaptability. Person A is a newbie trader with 1 to 2 years of experience in trading. He get tensed during live market and unable to take right trading decisions which results in losing the capital. Person B has more than 2 years of experience in trading. He can understand market movements, but lacks the flexibility in trading which results in losing money. Person C is an experienced trader and he is good in understanding market & has the ability to adapt any market situations. He makes more than 10% profit in few trades consistently. Experience in trading is important in deciding profit. That too in index options. Any one can make money in share market if he develops the qualification for it.
NSE:CNXINFRAEducation
by vanathi
20
Trader's Queries - Manual for trading - Part 5Query : How to over come losses and become a profitable trader? Answer : This is Part 5. If you are new, refer Part 1, 2 , 3 & 4 for better understanding. Step 10 : Develop an unbiased mindset. Why it is important? Let’s see how biases affect Person A’s trades. Example 1 : Confirmation bias. This happens when we believe what we want to see instead of the fact. Person A is having bullish view about the market and ignores all the bearish signs the market give him. He goes long even though the market shows the signs of weakness in uptrend. This type of bias gives loss. Example 2 : Recent bias. This happens because of the recent happenings which make us to forget the past completely. Person A had consistent profit for few days and he start to take all the trades with the expectation that it will give him profit only. Another example is once the market fall continuously for 2 or 3 days, 4th day most traders start their trade with the expectation that the market will fall that day too. Check whether your trades are influenced by your biased mind and start to see the real facts.
NSE:CNXMIDCAPEducation
by vanathi
29
Trader's Queries - Manual for trading - Part 4Query : How to over come losses and become a profitable trader? Answer : This is Part 4. If you are new, refer Part 1, 2 & 3 for better understanding. Step 9 : In the earlier stage of trading, every trader goes to the “victim state” of mindset often. Try to bring your mind out of it soon. What is the victim state of mindset? Example : Person A feels powerless during trading because of uncertainty of the share market. Person A's Interpretation : Only my stop loss get hit. Why it is me always? Why market turns against me whenever I take a trade? Why my strategy fails when I apply it in live market? These interpretations trigger the following emotions. Fear Worry Frustration Confusion Anger How to over come it? Person A should Improve his technical knowledge. Have to accept uncertainty is the certain state of share market. Improve his trader’s mindset. (To be continued...)
NSE:CNXMIDCAPEducation
by vanathi
23
Process Of Value Investing EXPLAINED with chart 🎯 Understanding the process of value investing is easy. But it is not as easy to implement The process starts with screening stocks based on its history. -----Stock History: Value investing is about picking blue chip stocks at discounted price. They represent established companies which has a long history trail. Example: stock analysis worksheet does not accept stocks which has less than 10 years financial data. Warren Buffett will probably look at, at least last 15 years data of a company to estimate its intrinsic value. ----Business Fundamentals: Stock’s 10 years financial data should be checked to estimate the financial health of a company. Idea is to shortlist those stocks which are fundamentally strong. Value investors will invariably invest in only those companies which are fundamental power houses. ---Price Valuation: This is the ultimate screener. No matter how established is the company, no matter how strong are its business, it is not enough. Value investors will not rest till it calculates the intrinsic value. To be more sure of the calculation, they will also apply a suitable margin of safety. Once this is done, comparing current price with intrinsic value value will highlight if the stocks is undervalued or overvalued. Undervalued stocks becomes a good buy. Example ..Consider the case of Tata Steel & Tata Motors. These are the flagship companies of the Tata Group. Probably they will not cease to do business in next 100 years. But it is facing hard times since last 5-6 years. ..The company is doing everything to maintain the shareholders value. Today (in 2020), Tata Steel has takeover Bhushan Steel. Tata Motors has launched new premium cars. This is a hint of their competence. ..A common man must always be in look-out of such business to buy stocks. When we see the past 10 years performance of these companies, it is hard to estimate their intrinsic value. It is because, in the last 10 years, the company has not performed as well. They have been making low sales and lower profits. ..But looking ahead in future, the prospects looks more promising. CONCLUSION :- If you want to invest in stock market, you must learn to practice value investing. The investor must at least know how to value stocks of companies. This way he/she will at least not invest blindly. There are two main ways of valuing stocks. One is done using financial ratios, and other is through intrinsic value calculation. For people who do not want to go into the hassle of intrinsic value calculation can follow the financial ratio approach. But it is not as reliable. 🙏FOLLOW for more ! 👍LIKE if think is useful ! ✍COMMENT Below your view !
NSE:NIFTYEducation
by ReviveTraders
41
Trader's Queries - Manual for trading - Part 3Query : How to over come losses and become a profitable trader? Answer : This is Part 3. I have attached the links for Part 1 & 2. If you are new, read those and then continue Part 3. Step 6 : Develop self awareness. Knowing what type of trading suits you give an edge in trading. Example Swing trade Intraday trade Momentum trade Break out trade Once you start gaining experience, your trading style start to change. Self awareness helps you to understand whether the change in trading style is good or not. As your knowledge evolves, your trading style also evolves. Step 7 : Align your personality with your mind and brain. “Trading in zone” happens when your personality is in alignment with your mind and brain. It needs a lot of training to reach that level. Step 8 : Check whether you are having “analysis paralysis”. In live market we get data from so many things like indicators, software etc. If the information/data is too much, then the brain goes to the overwhelming state and its function slows down. Whenever you are trying to change bad trading habits, if your new trading habit has too many data gathering points, then your brain will struggle to take decision and go to the old routine(bad trading habit). What to do to overcome it? Use less number of indicators. Keep your analysis simple. Keep your trading plan simple. Keep your thinking process simple. (To be continued...)
NSE:CNXMIDCAPEducation
by vanathi
33
STOP-LOSS Trailing method in detail !! 🎯Conclusion :- 1. Trailing stop loss is an order that locks in profits as the price moves in your favor. 2.You can trail your stop loss using: Moving Average, Average True Range, percentage change, market structure, and weekly high/low as well . 3. Investors uses above way to ride the trend till the last, & enjoys profits 4. as a investor you can ride it with trailing stop-loss by shifting it on phases wise / market structures 5.Read the important points mentioned on the charts 6.Refer chart for more information 🙏FOLLOW for more ! 👍LIKE if think is useful ! ✍COMMENT Below your view !
NSE:BANKNIFTYEducation
by ReviveTraders
3
The Perfect Trade Trading Plan !! 🎯Points to be remembered !!! ENTRY :- * Wait for your signals * Avoid FOMO * Do not revenge trade * Use correct size * Do not chase price EXITS :- * Let winners run * Cut losses quickly * Do not add to a loss * Accept losses and move on * Use targets but stay flexible OTHERS :- * Take trades with a good RRR * Think long term * Establish clear rules for your system * Process oriented > Results oriented * Accept responsibility for your actions * journal your trades
NSE:NIFTYEducation
by ReviveTraders
13
Trader's Queries - Manual for trading - Part 2Query : How to over come losses and become a profitable trader? Answer can be written as a book. So I am posting it in parts. This is part 1. I have the link of part one below in case you missed it. Step 5 : Understand why you hesitate or unable to make any change related to your trading habits. Example : Person A knows he is gambling, but continue to do that. His reasoning for the behaviour is he thinks there are two outcomes. Scenario 1 : I will continue to lose money if I did not take any step. Scenario 2 : There is no guarantee that after taking efforts, I will start to make consistent money. Why to take any effort when there is no guarantee? Interpretation of scenario 1 : I will be in a familiar situation. I will be within my comfort zone. I feel safe with familiarity, even though I am getting loss. I am very passionate about trading(OH YEAH). Emotions for scenario 1 Getting used to the emotions mentioned in step 3. Starting to like the familiarity with the emotions mentioned in step 3. Getting pleasure as it is the starting stage of addiction towards gambling. Interpretation of scenario 2 I have to work hard to change my trading behaviours. I have to learn new things. I have to adapt new things. I have to develop flexibility. I have to accept change. Emotions for scenario 2 Uncertainty Uncomfortable Possibility of disappointment Unexpected outcome. Now the question is why people prefer to trade or gamble. Does it mean they don’t like their job? Everybody likes to get the feeling that they are in control. Even though they like their job, like the salary, it has its demand of completing the work in time, reporting to the superior and they get the feeling that they are compelled to do the job against their wish. Now in trading to whom you report to? Who is your boss in trading? Answer is “YOU”. Thats why YOU like trading. “YOU” means your “EGO”. (To be continued...)
NSE:CNXMIDCAPEducation
by vanathi
44
Trading Style - Types Of Traders - What Type Of Trader Are You?Scalping Scalping is a very rapid trading style. Scalpers often make trades within just a few seconds of each other, and often in opposite directions (i.e., they are long one minute, but short the next). Scalping is best suited to active traders that can make immediate decisions and act on those decisions without hesitation. Impatient people often make the best scalpers because they expect their trades to become profitable immediately, and will exit the trade promptly if it goes against them. Being a successful scalper requires focus and concentration. So, it is not a suitable trading style for people who are easily distracted or who often find themselves daydreaming, so if you've been thinking about something else while reading this, then scalping is not for you. Day Trading Day trading as a style is more suitable for traders that prefer starting and completing a task on the same day. For example, if you were painting your kitchen, and you would not go to bed until the kitchen was finished, even if that meant staying up until 3:00 AM. Many day traders would not consider making swing or position trades because they would not be able to sleep at night knowing that they had an active trade that could be affected by price movements during the night (such as those that cause opening gaps). Swing Trading Swing trading is compatible with people that have the patience to wait for a trade, but once they have entered a trade, they want it to become profitable quite quickly. Swing traders almost always hold their trades overnight, so it is not suitable for people that would be nervous holding a trade while they were away from their computer. Swing trading generally requires a larger stop loss than day trading, so the ability to keep calm when a trade is against you is a necessity. Position Trading Position trading is the longest term trading of all and often has trades that last for several years. Therefore, position trading is only suitable for the most patient and least excitable traders. Position trading targets are often several thousand ticks, so if your heart starts beating fast when a trade is 25 ticks in profit, position trading is probably not suitable for you. Position trading also requires the ability to ignore popular opinion because a single position trade will often hold through both bull and bear markets. For example, a long position trade may need to be held through an entire year when the general public is convinced that the economy is in a recession. If other people easily sway you, then position trading is going to be difficult for you. Being Faithful to Your Trading Style Choosing a trading style requires the flexibility to know when a trading style is not working for you, but also requires the consistency to stick with the right trading style even when it is not performing optimally. One of the biggest mistakes that new traders often make is to change trading styles (and trading systems) at the first sign of trouble. Constantly changing your trading style or trading system is a sure way to catch every losing streak. Once you are comfortable with a particular trading style, remain faithful to it, and it will reward you for your loyalty in the long run.
CRYPTOCAP:BTCEducation
by THELEGENDSINGH
6
Trader's Queries - Manual for trading - Part 1Query : How to over come losses and become a profitable trader? Answer can be written as a book. So I am posting it in parts. Trading is a journey like life. You have to learn from each and everything happening to you and grow. Like life trading do not have any manual to give instructions about how to handle it. That is why people got struck in trading. Let us say “person A” was making consistent losses, or making capital zero more than once and get enrolled automatically in to the state of “feeling struck”. At some point every trader “feel struck”. Now the question is what to do next. When we feel struck we “over dramatize” things. We do not see the big picture. We get confused and feel there is no way of coming out of it. Step 1 : Accept the situation. Do not resist it. Do not create stories dwelling on it. Step 2 : Stop criticizing yourself or external circumstances like market movement, big players etc. Step 3 : Separate the facts, your interpretations about it and the corresponding emotions. Example : Person A lost money in trading today. Fact : Lost money Interpretation : I did not pre plan my trade as I did not have time. I did not have discipline. I did not understand market movement. I did not have enough technical knowledge. It was not my fault. I did not manage emotions during trading. These interpretations result in creating emotion like Guilt Fear Depression Anger Frustration Sadness Step 4 : Repeatedly worrying about the same situation would not help you. Consult with a person who is trading better than you, so that they can uplift you. (To be continued...)
NSE:CNXMIDCAPEducation
by vanathi
61
Newbie's Corner - Organized KnowledgeNowadays in internet we can get whatever information we need in any subject. Lot of trading related materials are available. Then why profitable traders ratio is very less ? One of the reason is mindset. And another reason is unorganised knowledge. Lets say for example a library contain books in various subjects, but they are not organised subjectwise. In that case can we find the book we need in an easy way? How long it will take to find the book you want? Even though the library has all subject books, since it is not organised, it is nearly useless, gives confusion and takes lot of time to access the book we want. Similarly when you are learning, organise whatever you have learnt. Master each and every small things you are learning. It will take time, but it does not matter. What matters is you are learning everything in an organised way. Knowledge is power when it is organised. You can make use of the power of knowledge if it is organised. After gaining knowledge practice it. Do you have organised knowledge? Have you mastered what you have learnt? Are you practicing it ?
NSE:CNXMETALEducation
by vanathi
3
How to handle emotions in trading ? During trading most of the newbie traders and part time traders face fear and greed. So why do we get fear and greed ? The origin of fear and greed is ego. The need to be right always trigger our ego, once we take the trade. Then ego makes sure that we wont book profit/loss in time. Mostly "type A" personalities face this problem often. They want to come first in everything they do and have a big ego. Most of them are unaware of their own ego. How to handle it? Start doing small activities with out ego. It will reduce ego level slowly. When is the last time you played with a kid and let them wn with out hurting your ego? Also whenever fear/greed comes remind yourself, your ego is trying to take control of you. One emotion triggers another emotion always and at the end you only have to face the consequence. To become a profitable trader, the very first emotion you have to take charge is "ego". Please note there so many other parameters which decides the trader's success. Speaking about ego, how many of you give like to the posts you read in trading view with out getting permission from your ego?
NSE:CNXENERGYEducation
by vanathi
16