Stop risk, cold
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Understanding emotional intelligence
You’ve traded and worked out your strategy – and you’re ready to take advantage of opportunities in the markets. But as many traders discover, something may stand in your way. No, it’s not market makers or high frequency trading programs – your biggest trading adversary is even more formidable and much closer to home. What you’re up against – is you.
Fear factor
Since traders work in a world of numbers, they often see themselves as clear-thinking and rational. But in fact, traders are emotional beings, and once your capital is on the line, fear of losing can influence your decisions and make you behave in ways that are anything but rational.
You may start to doubt yourself – Did I get in too early? Do I really trust this support level? – and try to second-guess your strategy. When that happens, you might take on trades you shouldn’t be in or stay on the sidelines just when you should be making your move.
Developing self-confidence
Self-confidence is the key to becoming a winning trader – you’ll need to believe in yourself and your trading plan. That might seem difficult, but keep in mind that every successful trader started out just like you.
While you can’t eliminate risk in trading, you can learn to make smarter financial decisions. First and foremost, if you begin to lose money, let the old adage “If you can’t stand the heat, get out the kitchen” guide you – don’t wait to see if your position recovers, just get out of the trade. You’ll be able to think more clearly once you’re out, regroup and look for another opportunity.
Stop risk, cold