"YOUR PERFECT EMOTIONAL SETUP"

Trading is an art. It is a blend of technical knowhow and an emotional set up. While we will be discussing the technical aspects in other articles, let us discuss how to define a perfect emotional setup.

It is rightly said “Trading is not

a game of the perfect”. If you strive for perfection, you can’t sustain in the markets. Trading psychology includes both the study of mass psychology and the perfect understanding of individual psychological traits.

We cannot have control over the mass psychology but being aware of it can be a boon for out trading decisions. The various forms of technical analysis wiz chart analysis and number analysis are nothing but advanced study of mass psychology. Many people feel very onerous to update themselves about recent developments. For example: We buy a stock on anticipation of good results, the results also turn out to be good. Yet after a small up move the stock starts cracking as if it’s all over for the company. Why? Just because we fail to realize that like us many other traders had bought the stock in the same context. Post results they book profits in the stock. The good results, as it every time happens, might have been priced in already. Therefore, mass psychology should pay a great role in influencing our trading decisions.

Apart from mass psychology, our individual traits are also important. Analysing reasons why people fail, recognizing and working on your vices, ignoring the idiots, Ah! We have talked about them a lot in our earlier articles. An effective emotional setup is the foundation of success for all traders. All your skills go in vain if you are not psychologically prepared.

To keep it simple and short let me jot down the important points for you.

·         Never go against the market trend.

·         Do not ride a matured trend.

·         Don’t increase your positions when a trade is going against you.

·         Very important: Do not get addicted to trading.

·         Try to learn from past mistakes and implement them to prevent future mishaps.

·         Don’t fall for the numbers.

·         Never trade more than your account size.

·         Look at the broader picture even before taking a short term call

·         Don’t let the three idiots influence you.

·         Work on your vices.

·         Do not gamble.

·         Never enter a trade unless your setup allows you to.

·         Have a predefined plan; that also a clear plan.

·         Last but most important: Follow strict stoploss orders. If not followed your life in the stock market arena will be shortened.

Follow the above mentioned steps to reach new heights of success.

Stay tuned for next article where we will further discuss and elaborate the above mentioned points.