Greetings to you, readers and visitors of the site about trading! In this article we will analyze in detail what is trading psychology and how to study it. If you carefully analyze the chart of shares, it is as if it displays the entire spectrum of human emotions. And this is euphoria, greed and fear, which drive the price of shares into unthinkable limits beyond their real value. This is why we often see the stock market collapse like a sand castle falling apart.
In order to correctly maneuver among all the ups and downs, it is necessary to regularly study the prevailing position of stock market participants, which is one of the important points in the psychology of trading. One of the important bases, which the psychology of a trader has, is a clear analysis of the current situation. At the time when you see patterns and models on the chart repeating over and over again, other players are already worried:
- Do you want to sell now or not?
- Or should I buy it?
- Do you want to take profits now?
- Do we have to wait without losses?
And if you are a professional trader, then the doubts of other players will attract in your favor. If you ask a professional trader a question about how to act in the current situation in trading, he will not show any emotions and will say that he should act according to his strategy.
This suggests that trading options does not involve managing emotions and motives. It is under the action of emotions traders open trades at an unnecessary moment. At the time when the surge in the market is in full swing, the Trend is already on its way back. At the same time, the losses of players increase, and the fear of losing all the capital increases. It is at these moments when positions are closed with a serious disadvantage. We must clearly understand that with large losses over time it is impossible to win back a huge profit. It is necessary to learn how to accept small losses, preserving your capital for a large profit.
Let us present the situation from the point of view of a non-disciplined and emotional trader, who is in a profitable position. But after two losing trades he starts to feel fear and euphoria when thinking about new losses. That is why his first thought will be “It is necessary to fix the profit to cover the losses”. Among professional traders, there is the expression – “Reduce losses, let’s grow profits!” But the player does the exact opposite on emotions. It just reduces the profit.
In order not to get psychological discomfort in such situations, it is necessary to adhere to the real working strategy of swing trading. Mark your plan on the records, and before opening a deal, it is necessary to set out the points, on which it is concluded. These points must be fully consistent with a clear trading plan and strategy. The famous investor Warren Buffet always wrote down the reasons before buying a share. If there were no reasons, he did not make the purchase.
Trading psychology. We analyze the chart
Efficient trading does not do without a full analysis, which is inherent to a professional psychologist. Looking at the chart, you should see not just lines.
models, and the real psychological feedback from the trading players. Analyze the picture below:
Trading breakdowns – when the resistance level breaks down, paper is purchased. The “bigger fool” theory means that there will definitely be players who will buy above the entry point. But most often this does not happen, a false breakout appears.
New traders enter the trade during the surge of trade, buying on the principle that everything is me. At the same time, beginners buy those shares, which they are offered by trading breakdowns at the moment.
Swing traders are professionals. We work from the level on the reversing candle and increasing volumes. At the same time, the resistance is our support.
Traders are newcomers – on the emotional rise, they assume that trading will be constantly increasing. At this moment swing traders will drop their stocks to them.
The psychology of a trader does not just mean the calculation of formulas and prices, it is an analysis of the chart “between the lines”. Looking at the graphical line, it is necessary to catch what is behind it. Accustom yourself to analysis and discipline, and only then start making a profit. You need to calculate your steps forward, understanding the mood and further actions of the platform participants. The psychology of trading will help you to do this.