In this article we will discuss How To Improve Trading Psychology. Making money in stock market is as easy as making a cup of tea, but your plan should be hundred percent process oriented not profit oriented. Not only in trading, in every business planning is fist step to making a empire of that business. A trading plan refers to a complete set of rules based on research that incorporates an investor’s objectives, time, and risk tolerance to cover every aspect of a trading period. A trading plan lays out procedures and conditions under which to search for asset classes and execute trades.
When a plane or spacecraft lands, or when someone lands it, it arrives somewhere after a journey. But where airplane lands it should be clear before starting of journey. All procedure and rules are set before starting of journey and once rules are set they not change during the journey.So trading in share market is a journey all rules should be hundred percent clear before taking a trade. But beginners and retailer traders thinks open the demat account and start trading, and when traders are in loss they think share market is a gambling. Open a demat account is last step in trading but beginners do this at first step so they fail.
Content Of A Trading Plan
Every trader should have a clear mindset about these points before started journey in share market..
- Why Do I Trade?
- Who am I as a Trader?
- What Type of Trader I am?
- Which Market will I trade?
- What are my financial goals?
- When do I Trade?
- How does my trading strategy works?
- How I will manage risk?
- What Trade Log & feedback will I use?
- What else do I need to upgrade myself?
Why Do I Trade?
why i do start trading this should be clear in trader’s mind. What is the purpose to start trading in share market. Is trader is influenced by other person or trader profit, lifestyle.What is the reason to start trading, is there any goal in trader’s mind for next 6 month, one year or next five year financial goal is set or not. This point is clearly defined by self.
What Type of Trader I Am?
This point should be clear by trader which type of trading style he likes. He is a daily Intraday trader, swing trader, positional trader in which style he has interest.
Which Market will I trade
When a beginner start trading he doesn’t know in which market he is interested. He start trading from morning equity market, when equity market close, he move to forex market then commodity market and finally he move cryptocurrency market. He doesn’t know in which market is interested.
What are my financial goals.
Before entering into market trader also have financial planing that from how much money he will start trading and how much return he expect monthly or yearly on his capital. What is the next six month goal in tradig. After one year or five year how much money he want to make from market. Short term goals and long term goals should be clear in trader’s mind.
How does my trading strategy works?
As a beginner trader when enter into market he follow brokers tips, from friends and on basis of news, what kind of news in current market. Sometimes he follow YouTuber, take courses etc. But not have a specific strategy, he want to become a master in all strategy like all indicator -Moving Average, Exponential Moving Average, SMA, bollinger band indicator, RSI indicator etc, and finally he doesn’t perfect in any indicator, doesn’t have any strategy and become a loss making trader. Every person not perfect in every field, he only perfect in a specific field. A Computer Engineer can not have knowledge about surgery operation, a doctor never have knowledge about how computer system works. Be master in one field, trading is same never be a master in multiple field.
How I will manage risk?
According me maximum loss will be 0.5% of your capital. But novice trader placed a nacked order and loss money in single trade if market sentiment not in their favour. So never placed a necked order in market this should be clear how much risk capacity trader have or maximum how much money he can loose. Place order always with stoploss price otherwise ready for loss all money in market. Think when you give some money to any person how many times you think, when you return my money, why i give you to my money, find out information about person etc. So when you trade in market why you not think like this. So always use a bracket order in brokerage application.
What else do I need to upgrade myself?
Upgrad your self from your mistakes. Where you are fail and why, what is the reason of stoploss in last trade. Where i made mistakes improve them. And be updated about market, what is going on in market right know. Use standard websites and application like https://tradingeconomics.com
Good Luck For Your Trading Journey.
Thank you