today we're doing a slightly different
type of video
but we feel it's a better way to share
the most
important trading psychology tips
that can improve your mental approach to
trading
let's start with one of the most
important trading psychology tips
learning to manage risk now risk and
reward
are what it's all about and um to be
honest most traders
do mishandle this part instead of
preparing
in advance and learning how trading
works
many just go all in before they
understand for example how the markets
work
or they end up risk losing money
they can barely afford to lose in the
first place
the first key to risk management is to
always trade with money
that you can afford to lose how much
money you have to start off with
doesn't matter when this part of risk
management is involved
no matter what your income is whether
it's high or low
your trading account should never have
money in it that
if lost means you are going to be
severely
financially damaged it doesn't matter
how good an opportunity
you think has appeared before you
because i'm sure we do all feel that way
but
you should always consider well what
happens
if you end up being wrong how much could
you
actually end up losing if you do this
even in the worst case scenario where
that
does happen you should be in a position
where it won't
affect your lifestyle or the opportunity
to invest
and trade again that's a very good rule
of thumb
we'll be doing a separate video about
risk management where we'll talk in
detail about
other related topics like the risk
reward ratio
the percentage you should risk on every
trade and how to adapt
to losing as well as winning trades
the next psychology tip is another
important one and it will help with your
discipline
before during and after trading
to help with your focus when it comes to
trading
you need to have a trading plan outlined
and preferably
this is written down it should detail
what instrument you're trading
the conditions and levels at which
you're prepared to
open a new trade and when you're in that
new trade
when you adjust the position if
necessary or finally
close the trade out having a take profit
and stop loss level
are also important parts of this plan
sticking to the plan will help keep your
mind from wandering
and overthinking and agonizing about
each step overthinking
during a heightened period of stress
usually leads to mistakes as the
emotional and more
primal parts of our brain take over
from the reason and logic focused area
and let's not forget risking money is
definitely a stressful activity as i'm
sure most of us
already know keeping yourself grounded
and coming up with a sort of a playbook
for different situations in the markets
can help prevent mistakes and limit
the damage these mistakes can end up
doing
our third tip is to try and
overcome your inner greed you don't need
to be a greedy person
to experience some levels of that
emotion
while trading when it comes to financial
markets
it's more or less a natural occurrence
but it's something
that should be kept in check for as much
as we possibly can you might have come
into trading
looking to get rich quickly or you may
have just had
a winning streak in the markets when it
comes to your trade
and think that finally you've got the
secret of the markets
figured out but in trading everything
can change
really quickly a trend that had been
going for some
time can switch direction a company
that have been doing well can have a bad
quarter and of course we can see
a currency can get devalued
overnight so having a plan prepares you
mentally
for almost every scenario and in turn
keeps those stress levels low
the less stress you experience the
better your decision making
should be our fourth tip is for
something very specific
something that some traders are prone to
doing
after losing the so-called revenge trade
this happens when you have a losing
trade then you fill up
with negative emotions and possibly even
anger
so you quickly decide to get your money
back
regardless of what the market's doing or
your own
mental state quite often uh the revenge
trade happens
with the same asset you lost money on um
you feel it owes you some money so
just like other mental states it can
occur
naturally no one likes to experience
defeat
and we want to get back at whatever beat
us
but in this case the thing that beat us
is um
the market it's a neutral juggernaut
influenced by hundreds thousands even
hundreds of thousands
of variables and it doesn't really care
that you
lost money the market is not an enemy
and it's wrong to treat it as one we
shouldn't look at it that way
to avoid revenge trading it's always
wise
uh that we we check ourselves after
closing a trade that ended up
losing money it will be unpleasant it
might even be painful for some
but you should let the negative emotions
run their course let them sink in
and dissipate and not affect your
trading attitude
instead of quickly trying to erase these
these negative emotions
you should stop trading take a break
get away from the screen and when you
get back to the charts
just try to analyze what went wrong if
anything
not every trade can be a winner but
learn from the loss
take some value from it instead of
repeating it and possibly making the
same mistake again
the so-called fear of missing out more
commonly referred to
as fomo this is the next thing you
should take a hard look at
when thinking about psychology and
trading
this fomo can be one of the main causes
of losses because it makes many traders
open trades in volatile assets that that
probably
aren't suitable for smaller and
medium-sized accounts
usually the move up or down has already
run its course
they're sucked in by that and the
majority end up joining
after the party is over so how can we
deal with this
well first of all it's advisable not to
rush in
without examining in great detail
the reasons an asset is moving are its
fundamentals that good
but in your opinion you think it will
continue growing
is it speculation and the crowd pouring
into it and deriving prices up you can
still trade it
but just try and understand why this
market is moving
other more specific points that we can
think about
when having the urge to join the crowd
on a fomo trade
is um take a look at the market very
very carefully with volatility are we
seeing moves in both directions
could we have a better entry point is
the momentum
increasing is there is the crowd
psychology still driving the market in
the same direction
or actually is it weakening should you
open
a smaller than usual trade but with a
wider stop
loss level to take uh take notice of
that increased volatility
double check and adjust everything and
if you're happy with how things stand
only then should you open a trade and
you're
countering that emotional pull of the
fomo effect
our sixth tip is to regularly review
your own performance so that you can see
the full picture this
has two components an external component
and an internal component the first part
is easy just keep track
of the trades you make the circumstances
and conditions
in which they were opened and then
closed and just like we mentioned before
if you made a mistake you can learn from
them but the second one is a little bit
harder
it requires dedicating some time and
space
to reflect on your emotions your
decision making
and of course everything else out there
that could
be impacting your trading different
approaches work for
different people but in my experience um
finding some time to think and review
after trading is done and you're away
from the screens allows you
to process the the ups and downs of
what's been going on
in the markets and with your own trading
our final
trading psychology tip is to take breaks
trading can be mentally exhausting
as it eats up your time eats up your
attention and
often your mental capacity it is a
challenging activity
that requires people to have a solid
level
of mental fitness and alertness if
they're going to succeed
if you day trade in particular in and
out of the market
several times during the day this should
be part
of your trading routine if you trade a
bit less frequently you can occasionally
sit out different situations and just
observe how they unfold
without risking anything on their
outcome this will allow you to recharge
and improve your chances to make the
right call
when the next opportunity comes along i
hope you enjoyed this uh slightly
different video
looking at uh some of the more important
aspects
of trading psychology as usual if you
have any questions
uh leave them in the comments below we
do read all of them and try and answer
as many as we can if you're watching and
you haven't subscribed
if you can click on subscribe it helps
out support the channel we'll be back
next week looking at markets with uh
silver i think the next market we'll be
looking at but for now that's it
so from me david jones and capital.com
good luck with your trading
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