Avoid this 1 mistake to make more profit in stock trading

Trading Psychology

Many traders start to feel too nervous as soon as they buy a stock for trading. Many also feel very impulsive to begin a trade without knowing about level of buying or selling. 

Are you any one of them? 

After reading this article you will get to know why  you loose more or make less profit than others. And by following the points of this article you will start making more money in stock trading.

So are you with me? Then read on.

Many of us know that stock market is a place where money grows very fast. So we get naturally attracted towards it. One way people can make money through stock market is stock trading.  Those who get attracted towards stock trading also know the risk involved in it. Still the attraction remains. After all who does not like their money to grow fast?

But there is a catch. Most people loose more than they gain in stock trading and blame stock market for it when actually stock market is not responsible for their losses. They are only responsible for their losses.

Why this happens?

You must have heard many experts saying like  research before investing or trading, don't blindly follow the tips of others. Don't invest money if you are not able to take risk and many more.

While all these are very true, there is one very important aspect nobody will tell you, and I am sure you have not heard about it, that is your own trading psychology. 

Yes, you heard it right psychology plays a very important role in deciding who will gain or loose. Who will make more profit and who will make less profit. This psychology is entirely your personal thing and you are the sole judge of it as no expert is feeling what you are feeling.

Now read on carefully. 

Every person has a different perspective of money which others don't know. Some has plenty of money and loosing some of it does not effect them. Some has extra money with which they are ready to take risks. And some are more conservative. They want their money to grow fast but can not handle loosing money.

So it it very important to know yourself before you start trading or investing in stock from now onwards.

Know Yourself

All of us want our savings to grow fast. But growing money fast means taking more risks. So before you start trading  in stock first understand your risk taking ability and the money on which you are ready to risk. And remember you are the best judge of it.

Safe Player

If you are more afraid of loosing your money and safety of money is priority at the cost of low return on investment then you are a safe player. You don't have risk apatite and you should not invest in stock market, forget about trading. 

Even in future if you need your money to grow fast it will be better for you think carefully before jumping into stock market.

Moderate Risk Taker

If you want good return on investment on some part of your investment with while playing safe in other part of your savings, then you are a moderate risk taker. You can invest through mutual funds or can buy some stocks for long term holding which can give you better return than other investment instruments available. 

But trading is not for you. Thinks twice before starting trading as you are more likely to loose more in trading than gain.

High Risk Taker

Different profile fits in this category. But to sum up in short any one who want their money to grow really fast  even at cost of loosing some of it are high risk takers.

Remember take high risk only on that part of  your money which even you loose will not effect your financial condition. Or with any money which you don't  need to meet any financial goal.

These people are fit for trading.

Day & Short Term Trader 

Now if you find yourself fit for trading further identify yourself as day trader or short term trader.

It is very important to identify yourself and stick to your profile because psychology for both are different and can be decisive in your loosing or gaining.

If you are a day trader then you must close your trade within the day whether you make profit or loss. Only hold your trade if you are short term trader and that to maximum for 4 to 5 trading sessions.

Real Trading Scenario

Now lets consider a situation of a normal day trader. Let's name him Raj. 

Raj got some advice from a known person about a stock and decided to trade in it without any research. He was watching the prices and decided to buy at a certain price. 

But when he puts the purchase order the prices start to rise and Raj's become anxious if he will get it at that price or not. The price goes further higher and now Raj became restless and started to think to buy the stock at higher price. 

The price rises a little more and now Raj  could not control his impulse and bought it at higher price than his target buying price. Now as he bought the stock he feels a little better that he has an opportunity to make profit. 

What happened here is that Raj bought the stock at higher than target price. 

Does this ever happened to you?

Now after buying the stock Raj prices rose further and he was excited to see the notional profit he was having. He thought to sell the stock at 2% higher than the buying price. And on that expectation he was waiting.

Now the price started to decline. it fall further than his purchase price. And was hovering below his buying price for some time. He became restless again and not feeling good. It continued for some time.

Now as price stayed below his purchase price he became anxious, and was only thinking negative and started to think about recovery of loss.

So his mindset shifted from making profit to recovery of loss. So now he put a sell order a little above the purchase price hoping that it will trigger and he will not loose money.

After some time the price started to rise again and it slowly was coming near Raj's purchase price. But still the price was volatile and going up and down. Raj's heart beat become fast and he was praying that the price goes further up and his sell order triggers.

After some time price rose further and the sale order triggered and price keep on rising. And now Raj started to think he did foolish thing, he should have hold on for some more time. He missed an opportunity make more profit.

He promised to himself he will not do this again.  Are you able to relate with this?

This is just one scenario. Please mention in comment how many of  you have faced a situation where you bought a stock and price started to fall. And you started to think every time you buy a stock it start to fall and you thought your luck is not good enough.

Developing Trading Mindset

Its not about your luck rather your lack knowledge about the market and trading. This lack of knowledge make you take decisions either on assumptions or impulse.

The fact is when you  are driven by impulse, your thinking brain shuts down and not able to make informed decisions. In this situation the decisions are driven by emotions of  that point of time.

When it comes to stock trading this emotion is mostly fear of loosing. So your excitement and hope of making profit soon can turn into fear of loosing and your decision making will be driven by this emotion.

When you are trading in stock you have a chance of making high profit in small time but at the same time you have the risk of loosing. So if you want to make profit be ready to loose some money as well. 

If you are now ready for it, you are not for it. Stock trading is not for weak hearted people.  So pleas work on your mindset if you want to become a seasoned trader and want to make quick money.

How will you develop trading mindset?

The first rule to develop this mindset is don't put any money which you are not ready to loose. If there is no money which you are ready to loose then stay away from stock trading.

Second thing is that don't start trading when you need quick money. When you start with need to make profit you will not be able to fit into the trading mindset. Fear of loosing will take over you and you will most likely loose more and blame stock market for it. 

This will happen because you need some time to study and learn trading and when you start with need of making profit you don't give yourself that time. Also the need of money makes you more negative than positive.

So if you really want to trade then start when you least need the money and there is no pressure. Study for some time and start with small amount of money. 

When you don't put yourself in pressure situation your brain will be more stable and your timing and levels of trading will be better.

 

Keep on doing small trades without having the expectation of making big profit. This will give you time and practical experience how the market moves. 

The dynamics of the market is that is does not remain quiet and is moving all time by the mindsets of people like you. Only those will make more profit who have clear and stable mindset.

So your psychology or you can call it trading mindset is the most important thing to decide if you will make profit or not.

Some people may say that what about knowledge of stock market? Isn't it the most important thing to make profit?

Knowledge is very important. And you must not start trading without having sufficient knowledge of technical analysis. You must not drive yourself by other's guidance.

But as a common trader no matter how much knowledge you acquire you will not be able to make profit until your mindset is in tune with movement of market. 

As I have already mentioned stock market is not for weak hearted. It is neither for them who are not ready to loose. As you can not make profit all the time. Some trade will go wrong and you will loose some money. You need to accept it.

So it does not matter how much knowledge you have until you have right mindset, or you can say ready to lose some mindset. Please remember stock trading can not be done by impulsive decisions. You need to have calm head for it.

So give yourself that time to attain that calm head of trading by investing some time and money you are comfortable with. And keep on acquiring technical analysis knowledge.

Importance of Technical Analysis

It is very important to understand technical analysis, even if appears difficult initially. Please start learning about it before you start trading. It is very important to know which stocks to trade, the level of buying and selling. The level of  stop loss. These are very basics. 

If you are not ready to learn and want to get guided by your intuition or by advice of others, then do it at your own risk. As there is high chance you will loose more than you gain.

Why learning technical analysis so important? Is it just to let you know the levels of buying and selling?

No, there is more to it. It will effect your psychology positively to great extent and increase your confidence level for stock trading.

When you feel you are becoming more confident then increase your trade value. With time and knowledge of market movement and most importantly calm head you will become seasoned trader and start making good profits.

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