Trading Mindset

Trading psychology is as important as other attributes such as knowledge, experience and skill in determining trading success. Discipline and risk-taking are two of the most critical aspects of trading psychology, since a trader’s implementation of these aspects is critical to the success of his or her trading plan. Fear and greed are the two most commonly known emotions associated with trading.

Greed often causes traders to stay in a profitable trade longer than is advisable in a bid to squeeze out extra profits from it, or to take on large positions. Fear causes traders to close out positions prematurely or to refrain from taking on risk because of concern about large losses. Fear is a potent emotion that can cause traders and investors to act irrationally in their haste to exit the market.

Successful traders have some common psychological traits that contribute to their success. These traits include: Know your limits and do not over trade, risk management to preserving capital and finally maintain trading discipline at all times.