Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully.
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading and investing decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the environment (media, others’ opinions, etc.) that could sway the trader from sticking to his trading plan will have far more power. When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche. (more…)
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rss5 Signs You’ve Matured as a Trader
1) Are Self Reliant: When you stop asking other people: “What do you think of the market?” While I respect the opinions of my colleagues, I DO NOT rely on them. I prefer to do my own homework, research and analysis. I LET THE MARKET tell me if I’m right or wrong.
The ultimate goal for traders is to make confident decisions on your own and trade with complete independence. You should not have to rely on the opinions of others because you should have conviction in your OWN ideas.
2) Stop Celebrating Winners: When you stop feeling the need to pound your chest every time you make 30 cents on a stock. (It is the flip side of not getting depressed over every loss). Recognize what you did correctly and move on to the next trade.
Same thing goes for the stock market. Don’t act like you’ve never had success trading before.
3) Let the Trades Come to You: When you stop feeling the need to trade every day and you get over the “fear of missing out.” This is the downfall of most traders.
It took me a while to shift my focus from worrying about “missing out” to playing great defense. Once I did this, I noticed an increase in my confidence level as a trader. Keep in mind, there will ALWAYS be opportunities and it’s okay if you miss a few. (more…)