When your money is on the line, it’s easy to feel afraid of potential losses, but winning traders and investors are more at ease risking capital. They take ups and downs in stride. They don’t sell early out of fear or become riddled with self-doubt when they realize they don’t have infallible market information.

As one seasoned trader put it, “The psychology of professional traders allows them to stick to their strategies. They don’t stress out as much as the novice traders and investors.
Patience is a virtue when attempting to trade profitably.

It is useful to remember that humans have a strong, natural tendency to avoid risk and loss at all costs. This tendency often protects us from harm, but if you want to let your profits run, it is vital to accept risk and potential losses.

We are naturally inclined to avoid losses at all costs, even if it means selling a potentially winning trade before it reaches fruition. But unless you can let winners increase in price sufficiently, profits won’t balance out losses. It may not be easy, but with time, you will learn to accept risk, control feelings of regret, and avoid selling profitable positions too early…..

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Trading in the stock markets is a lot like life that we live each day. We can become “traumatized” by losses and setbacks and find it difficult to get back up. It can be emotionally overwhelming. If one is single and has a string of bad dates or rejections, for example, he or she is less likely to go out again. The disappointment just hurts too much.

From an evolutionary perspective, it is quite adaptive. If you touch a hot stove and get burned, you would be foolish to touch it again. The human mind evolved to avoid risks and to protect the human in the long run.

If you are afraid to get hurt, you hesitate. The best way to reduce fear is to trade with money you can afford to lose, manage risk so that you know you can handle the worst-case scenario, and take your ego out of the picture. A trade is just a trade. The outcome should not define who you are as a person. The more a trader imbues a trade with psychological significance, the harder it will be to execute the trade. When your ego is on the line with your money, you will choke under the strain.

Trading coaches strongly suggest limiting losses to only 10% on any stock investment before closing off your positions and only trading with money you can afford to lose. In that manner, you can still conserve 90% of your investment capital to look for other stocks to make back those losses.

Remember that if you have no more “bullet” to fire, then how can you fight another battle with other market participants in the stock markets….?

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Confucius said, “Our greatest glory is not in never falling, but in rising every time we fall.” Talk to any seasoned traders, they all fell to low points during their trading careers in the stock markets. When you strive to do great things, failure is inevitable.

It’s vital to remember that setbacks may knock us down, but they don’t need to keep us down. We can get back up and try even harder. As Napoleon put it, “My downfall raises me to great heights.” When embarking on a trading career, it’s vital to keep your spirits high and your long-term objectives in front of you.

The world ain’t all sunshine and rainbows. It is a very mean and nasty place. It will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is going to hit as hard as life. But it ain’t about how hard you hit.

It is about how hard you can get hit and keep moving forward, how much can you take and keep moving forward. That’s how winning is done….

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Corrections happen! You can’t live in fear of stock market crashes, because if you don’t play, you don’t win. The market has a “must be present to win” criterion. There will always be artificial reasons that someone will tell you why you should sell stocks and go to cash. Ignore it! The most money that has ever been lost in the stock market is that which sat on the sidelines because of fear…..

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There’s no right or wrong way to trade. Some traders prefer safety. They prefer to trade only during a solid bull market where everyone is enthusiastic and the indexes go nowhere but up. But the markets don’t always go up, and there are times when you have to think creatively and go your own way.

To trade like a winner, you must think outside the box, guessing what the crowd will do next, and anticipating how the movement of the masses can benefit you. The astute trader knows when to follow the crowd and when to go against it. The crowd is usually right, until the market trend turns. Some analysts are saying that we are in a turning point right now. It may be that an overvalued market is correcting or it may be that the economy is going to head south. Whatever it is, many are planning for a crash, maybe not a big crash but a little one at least.

The challenge is deciding if we are in a turning point, and if we are, developing a trading plan to capitalize on it. How do you do that? A contrarian thinks creatively. For example, during the Great Depression, radio became a big hit. People didn’t have money to go out on the town, so they stayed home and enjoyed “free” entertainment on the radio. If you are a creative trader, you must anticipate which stocks will go up as a result of an economic downturn. Obviously, in 2006 radio isn’t going to be the hot, new industry that suddenly makes the big profits that bolster stock prices. But there will be some new industry that is going to be the next big thing. If you think outside the box, you can identify sectors that will move upward in the future.

This all sounds great in theory, but in practice, it is difficult to anticipate which stocks will move upward in the future. How can one predict the future without a crystal ball? It is almost impossible. All you can do is to make an educated guess, but at the same time, be ready to admit that you may be wrong. Whatever you decide, however, you must temporarily have full confidence in your method, put money on the line, and act decisively. Sometimes thinking independently is lonesome and scary, but in order to be on the winning side, you have no other choice but to go your own way. So think optimistically. Do not run away like most people. Give it your best shot and think of ways to make a profit while the masses are fearfully and hopelessly getting ready for a crash…..

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Stocks are the one thing that no one buys when they go on sale. If you believe in the company, buy more when Wall Street has a fire sale or falls out of love with your company. But always reevaluate why a stock has become cheap. There may be a reason other than the typical emotional market whims. Be true to yourself and ask some tough questions. Compare this investment to others that are doing well in your portfolio. Where is the best place for your hard-earned money?

Sell reluctantly, and don’t panic. Corrections create opportunities. You wouldn’t want to buy always at the market high. All stocks eventually have a selloff period, regardless of how great an investment the company may be. It usually takes six months or so to reach a bottom (so give it time to get there). Be patient before you add more to your positions….

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There is a universal law that whatever you expect, you tend to attract. That’s why many of us don’t get the results we want. We may desire the best, but how many of us really think it is possible? How many of us consistently expect the best?

Throughout the early years of your life you may have learnt to expect the worst. It may have been because your parents were like that and you’ve adopted the same manner of thinking. Or, it could simply be a negative attitude. But, that too, could have been picked up by associating with someone else. Or maybe you’ve developed negative expectations because of past bad experience. Because things have turned out unfavourably before, you believe that they’ll continue to bad. Because you failed before, you find it that much harder to believe that you can succeed the next time round.
But to desire prosperity and success in life, but yet, always expecting misfortune, or to be continually doubting our ability to get what we truly want, is like trying to reach east by traveling west. A person cannot consistently doubt his or her ability to succeed, and then succeed. These thoughts of doubt will always attract failure.

A large part of your current circumstances in life now, whether they be positive or negative, are a result of your faith, belief, and expectations. If you want to change your circumstances going forward, then obviously, you will need to change your faith, belief, and expectations. So, go ahead and expect the best and nothing but the best in life….

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Many of the advertisement commercials for the major online brokerage firms give the impression that all a typical investor has to do to achieve financial success is open an account, trade in the stock markets and take home the profits. In a strong bull market, it may be possible, but during the past two months, I wonder how well this strategy has worked. We have seen some major drops in the markets in recent weeks. If you’ve been on the right side of trades, you’ve profited, but if you have been on the wrong side, you may have felt frustrated.

Some traders have said they experience flow while trading in the pit. I can see why. When you see an institutional trader walk in the room, and you know what he or she wants to buy, it is a simple matter of buying and selling and making a profit. But how often do such opportunities occur while trading online by yourself. While trading online, you must find your own edge. It’s not as straightforward. The only way to succeed is to anticipate setbacks, take them in stride, and persistently find trading strategies that will help you take home profits.

Although trading in the stock markets is not as straightforward, it makes sense from a purely motivational standpoint to assume it is. Rather than get bogged down during setbacks, it is useful to accept them and work under the assumption that if you keep learning how to trade, gain more experience, and hone your skills, you will eventually achieve profitability.

The key is to keep at it, get good training and mentoring if necessary, and manage risk in order to survive the learning curve. It may be a fact that not everyone can trade, but unless you try your best and persist over time, you will never fit out if you are one of the rare few that can master the markets.

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If an individual sets an achievable goal and never gives up, they will either achieve their goal, or die trying. If a civilization sets an achievable goal and never gives up, they will achieve their goal. What shall we do?

Matthew Keith Groves

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Regret is a powerful emotion, so influential that behavioral economists have argued that it is more powerful than fear or greed. When trading in the stock markets, making poor trading decisions and facing regret is inevitable. There’s a very human tendency to be overtaken by regret. There’s a feeling of loss, usually a sense of denial, and a wish to “undo” the mistake earlier. Traders and investors don’t like to lose or feel regret. They want to win and feel pride.

According to behavioral economists, the need for pride and avoidance of regret work together to make them do things that they should not do, such as prematurely selling off winning positions and holding losers unnecessarily. For example, selling a loser forces investors to acknowledge that their trading plan was flawed. Instead of feeling pride, they feel ashamed, which is an unpleasant emotion. It’s hard to face regret from making a bad decision, so such a decision is put off. By leaving the losses on paper, the feelings of shame and regret are avoided.

On the other hand, selling a winning position allows for bragging rights. A person can feel the pride of making a big win, and bask in the glory of a good trade. When success seems like a sure thing, it’s easy to make a decision, but when you aren’t sure what will happen, or don’t want to face a loss, inaction is likely to paralyze you. No one is perfect. Reminding yourself of your limitations and accepting them would help you alleviate feelings of regret. Why not let yourself feel better about your mistakes, and spend your time and resources looking for the next market opportunity rather than living in the past?

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