Winners Psychology

Why gaining Control over Emotions is important When you are Trading in
Stock Market?

It’s wisely said in the markets that “The expectation that you bring with you in trading is often the greatest obstacle you will encounter.” – Yvan Byeajee.

I am writing this article for all my friends who say Technical analysis always put me in losing side, Technical analysis made me lose money more than I earn from technical analysis.

So, with my experience in equity market I have learned that 90% of the Chart Pattern breakouts works but the only thing that doesn’t work is our control on emotions i.e. our Greed and Fear While we are in Trade. We have to be extra-ordinary, fast and different from the investors/Traders to make big money in Stock Market.

So, first let’s discuss what factors plays important role that affects your trade in stock market.

Fear:-

 Fear? Really??  Yes it is fear that forces you to book loss in trade and the bitter truth is few accepts it. Consider this situation, you make every correct move; you research and plan your trade, then buy at the perfect entry point. The following day market goes against you. Your stock plummets and hits your mental Stop-loss point. Should you sell now? Will the stock immediately rebound if you do? Will your loss be for nothing? If you hold on a little longer, will it turn into green? Will you have to admit to others you were wrong? Your feelings, your fear made you book more loss. This is because you ignore your stop-loss and turn your back on the falling stock.

Greed:-

 Greed that forces you not to book profit in trade and the bitter truth is few accepts it. Consider this situation, you make every correct move; you research and plan your trade, then buy at the perfect entry point. The following day market rose exponentially. Your stock roars and hits your first target. Should you sell now? Will the stock immediately falls if you do? If you hold on a little longer, will you able to again more? At this point, most people didn’t sell they want more and more profit and suddenly what happens your stock falls irrespective of the market and hits stop loss and you didn’t  sell at this point too as you are Thinking market is up and In the end, Your feelings, your fear made you book more loss. This is because your greed of making more money doesn’t allow you to sell this stock at your assigned target.

Fear is 3 times greater than Greed:-

From the above two examples you understand that Fear and greed plays an important role in behavior of stock. Now Look at the below chart, the stock takes a lot of time to rise but when it falls it falls very fast. This is because fear is stronger than your greed.

Fear and greed

Greed initiates demand, so does fear initiate supply.

How to Control our emotions while Trading/Investing in Stock Market?

Maintain Discipline while trading:-

Discipline is a key trait every trader needs. The market gives you infinite opportunities to trade. You can trade thousands of different products every second of the day, yet very few of those seconds provide great trading opportunities. If a strategy provides about five trades a day, and stop losses and targets are automatically set for each trade.

Use different indicators to cross verify your trade:-

If you are trading only on the basis of charts then don’t  do this try to add different indicator for example draw Fibonacci d retrenchment levels and check for perfect stop or resistance, Use moving averages, Check  stock volume  pattern and try to figure out what big fishes are doing here, Check for MACD crossover , Check the trend from ADX Indicator you can use any Technical Indicator You like but before taking any action confirm your trade and at last Don’t forget to check what kind of Candle is formed near support and resistance area.

Patience: -

Patience is related to discipline. When a trader is entering or exiting the market at inopportune times, they will often say, "My timing is off." One could also say, "My patience is off." Jumping into, or out of, trades too early or too late is a rampant problem among new traders.

Traders require patience in waiting for their ideal entry and exit points—based on their strategy—but when the moment calls for it, they need to act swiftly. There is a constant seesaw between prolonged periods of patience, followed by split-seconds of action, which are then followed by patience, and so on.

Don’t lose hope and confidence:-

While you are in a trade and the stock is not moving as per your expectation (When your stock is not rising and it didn’t going towards your mental stop-loss). You don’t have to lose your patience here and sell the stock at whatever price you find. Although you have to be confident on your strategy and you must follow your strategy till it decides direction.

If you guys have any doubts regarding anything you can follow below link to ask your query.

Follow this link to join my free learning group:

Thank you