Trading is not as simple as a lot of beginners think. It is not a secure source of income and you must be able to effectively cope with your emotions to become successful.
Ensure that you never let emotion influence you to make or change any single trade idea. Also, be certain that you have the ability to get over failure, lengthy losing streaks, and the financial burdens that traders often encounter.
Possessing the ability to overcome emotion is perhaps more critical for a trader’s success than their strategy.
Trading Is NOT a Secure Way to Make a Living
After COVID-19 rocked the world, more and more young adults started day trading. When the market turned bearish in April and May 2020, there were periods when these new retail traders were outperforming hedge funds.
However, do not get fooled when you see new traders or internet personalities like Dave Portnoy talk about how easy it is and gloat over their returns.
Traders DO NOT easily generate income and you must be able to overcome emotion to succeed.
Trading is perhaps the least dependable career. If you need cash, you should find an actual paying job. There are no guarantees for traders and the money is hard to come by.
Professional trading requires blood, sweat, and tears. If you are not willing to put in the hard work and manage adversity, you will not succeed in the long run as the market will eat you up.
Understand that you need to be a hard-working, intellectual individual who can cope well with the repeated agony of day trading in order to become successful.
The Mentality Needed To Trade
You need to have the right psyche and dedication to succeed in the market.
If you think you will be a successful trader just by following your price charts and strategies, you are in for a shock.
Success depends on how you respond to crises. You will lose money and be in tough financial situations at times, especially early on. There will be moments when you want to quit after going on a lengthy losing streak, as the vast majority of traders will hit a learning curve.
The good times should come, but the bad times will test you. Trading can break you down and mess with your head. Becoming a professional trader means throwing your life in front of potential crises and getting through it.
You need to get over the tough times and learn from them, and you must cope well with your emotions if you desire making a career off of the market. It will be challenging, and if you don’t manage conflict well, consider another way to make a living.
Never Allow Emotion to Influence a Trade
Make sure that you always follow your system and never trade on emotion alone. Beginners often make the mistake of exiting or entering a trade too early based off of their reaction to price movement or something they read on Twitter.
When you finalize a trading idea or strategy, do not change it. It is always important to trust your system and not alter an idea based on emotion.
Entering a trade early or exiting before the stop loss or profit target is reached will limit potential earnings. Always stick to your plan while trading unless truly unexpected market news alerts you that the price is only going to go down.
Don’t overtrade either. Novice traders sometimes enter the market on untested occasions more on days when they are doing well, or if they are trying to make up for recent losses. Also, they may risk more on one trade if they have great confidence in the idea, even if it does not abide by their risk management policy. Overtrading is gambling and is likely to put you in a hole.
Avoid allowing sudden emotions to influence any trade. You will only become a successful trader by following your strategy and risk management policy.
Why Having a Good Strategy Isn’t Enough to be Successful
Understanding indicators, performing technical/fundamental analysis, and following a risk management policy are all essential parts of becoming a successful trader. Many novices believe this is all that is necessary to be profitable.
The problem is that giving even a high school student could learn how to trade and develop a strategy. Anyone can do it!
Although any individual who studies and trains hard enough could become a trader, you need the right mindset to be successful.
Being a trader can be psychologically damaging. It will make you feel weak and like a failure at times. If you cannot deal well with extreme stress or financial hardships, then trading is not for you.
You need to be willing to overcome your emotions and keep going, no matter how battered you feel. Even if your strategy is well developed, it is not airtight and it will fail you on occasion.
For professional traders, the ability to cope with emotion and failure can be more critical to success than strategy.
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Trading is not for the faint of heart. You cannot become successful unless you can keep your emotions in check.
Never allow emotion to change or influence any trade. You must be able to put in the hard work and get over failure and hardship to profit over the long run as well. Dedication and mental toughness are required for prosperity.
