Love it or hate it… the stock market is continually making (and losing) money for people on a daily basis. It’s not just about jumping in and out of stocks, or investing in a 401K for 20 or 30 years… it’s about coming up with an investment plan and strategy that works for you.
With all of that being said, stock market traders can lead one of the most highly charged and stressful careers imaginable. Full of non-stop action and major ups and downs, it can be easy to feel overwhelmed and become agitated by factors that are out of your control when riding the stock market wave.
Sound familiar? Are you new to trading?
Take a moment to read through our latest reference guide on how to stay cool, calm and collected, even when Pompei is burning around you. The stock market is a crazy place, so be sure to prepare yourself before you enter.
There is a psychological phenomenon where some believe that over studying a subject can lead to a blank when it comes to putting the theory into practice.
For example, aspiring traders run around from book to classroom to teacher to try and find the best trading strategies but overthinking and second guessing takes over when the time comes to actually put in a buy or sell order with real money. In this situation, a trader has learned the theory over and over but that doesn’t do anything to prevent the body and mind from freezing over.
So, remember that while you do need to put hours into learning about the stock market and different strategies, don’t forget to dedicate some time to using a trading simulator where you can put what you learn into practice. This strategy is referred to as paper trading and the best part is you don’t have to risk a cent of your own money so it’s a win-win.
Knowing how to react in a simulator can be a bit different to a real-life market as there are different scenarios to take into account. Making sure to give yourself allowance for emotional control is a good way of being able to keep yourself in check.
The first step to this is making sure you know what makes up an emotion: stimulation, feeling, motivation, belief and temperament. Once you have understood the concepts of what they mean, you can better understand how you can make your emotional state work for you as opposed to against you.
Timing Your Trades
Market timing is used to maximize profits and balance the associated risks with high gains. It’s essential that you educate yourself on the importance of market timing and what that can mean for your own trading strategies.
What times of day see the greatest volume of action?
When does volatility spike and is there a way you can leverage that knowledge to set buy and sell orders? Is there a small window where you won’t be able to be online and ready for action? These are all questions you need to consider when it comes to timing your trades.
You are not going to win every single trade so be real with yourself. A successful trader will be right about 60% of the time (and sometimes less) so rather than dwelling on your defeats, you should focus on your wins.
Keeping this in mind or repeating it as a mantra is a good way of stopping yourself from over-stressing and being your own worst critic.
How to Keep It Together When Your Trading is in Chaos
At the end of the day, no one know what the stock market is going to do tomorrow. Some people might think they do, but it’s really all a toss up.
The important thing to remember is that you need to have a strategy in place. Know your limits, what your goals are, and when to enter and exit a trade.
With more attention on the stock market, cryptocurrency and investing than ever before, now is a great time to get started — but make sure you prepare yourself… as it might just end up being a wild ride!
If you enjoyed this article, be sure to check out my other stock market related articles by using the search box on the right side of the page. And of course… this is all just useful information and resources for you to read through. In no way am I a financial advisor, or recommending any trading advice.