Trading psychology
Become a better trader by working through free interactive courses on IG Academy.
Traders, Lee Sandford says, can be vulnerable to early failure because of a lack of discipline, which often leads to the trader running out of funds. To combat this there has to be an early adoption of a routine that forms the basis of a consistent practice.
Highlighting three main influences on consistency, Sandford talks about rules around the technical aspects of trading, as well as the mental and biological aspects that are needed.
Technical consistency includes going into a trade with an aim or a target. Meeting a target will either trigger an exit of a position or, if a trend is in place, an understanding of how to benefit from that market and to keep the profits flowing.
The mental aspects, Sandford says, circle around early successes or failures. There is a temptation for the unseasoned retail trader to expect that things will always go well after a period of success, and that there is no hope when things do not turn out as planned. It is at these two extremes of emotion when mental consistency tends to go awry. Linked to this are the biological aspects, where a trader must learn how the body reacts to the stresses of winning or losing, by over celebrating a win, or getting caught up in a depression following a loss.
To this last point Sandford looks at the different character types and suggests that you find out where you fit into the accepted psychological profiles. Knowing this will help you understand what your responses will be to a list of all possible outcomes.
.jpg)
