A traders emotions and mental state are critical aspects of success in the financial markets. After all, traders are humans, and humans are emotional creatures that sometimes neglect knowledge, rationality and experience in their decision-making process. In the high-octane world of trading, emotions such as fear, greed and panic can be triggered quickly as your trades move between gains and losses. Trading Psychology is not black or white though
If you’ve only just begun to think about how emotions can impact your trading strategy, you are not alone. The massive growth and widespread adoption of online trading platforms has made the financial markets accessible like never before. Each day young, inexperienced and overly excited traders deposit money and start trading with the dream of making millions. Little do they know that the biggest barrier to success is themselves.
How important is trading psychology? Let’s just say that the psychological state of investors and the crowd at large have been studied at length by behavioral theorists, economists and even investors themselves. These studies have yielded some important findings about the negative impact of emotions on trading and how investors can learn to control the mind traps that cost them so dearly in the market. In this primer we look at four common “emotional” traders in order to learn from the triggers that cause them to fail. If you’re reading this, you’ve probably let all of these emotional triggers impact your trading behaviour at one point or another.
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