INTRODUCTION

This image was made by me, using my phone (PicsArt application).

This week's topic is not far from what most traders experience in their daily trading chart. Most users believe in jumping into any market and hoping to get a positive response from it, without giving it a close look and understanding how to minimize some negative outcome that may surfaces. As a trader, they're some kind of expectations that shouldn't be in our thoughts. We should rather think of how to perfect our trading ways, minimize expectations and know how to control/develop some of the trading emotions we face during the course of trading.

Most businesses today involves trading, and allowing your emotions to get the better of you while you trade can easily affects your reasoning. Affecting your reasoning as regarding to your trading can make you take unplanned decisions, which is why the trading psychology as a course is introduced to help lessen and control this feelings.

I will be glad today to respond to the week's homework task and to make sure that I give a detailed report on trading psychology, how to control such emotions and how develop a good trading habit.

What is trading psychology.

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Trading psychology explains or describes the various types of feelings or emotions experienced while trading. Trading psychology lays out some emotions encountered during trading, reasons for these and how they can be easily controlled.

We can also say that this shows the trader's ability to handle issues related to making profits and ability to manage risks without changing his/her initial plans.
When trading, it is very impossible to do away with emotions, that's why controlling them is necessary. It is also very important that as a trader, you don't allow emotions get the better of you. Not all of this emotions are bad, some are good, but more often, traders experience the bad aspect of it. There are basically different ways to trade, so we can't say that all traders should use a particular method when trading.
In the cryptocurrency world today, the most common type of feelings encountered is the fear of missing out(FOMO). When a cryptocurrency rises in the market, the next thing people do is to deposit money in it for trading purposes without understanding the past trend of such cryptocurrency. After putting such huge amount of money, the next thing that happens is the opposite trend of such currency, depreciating it value which leaves the trader with much emotional stress and fear of losing his/her funds.
To become such a better trader, you should be able to manage these bad trading feelings and learn how to benefit from the positive emotions.

Explain any 3 out of the above listed emotions which occur in trading.

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Now after explaining what is trading emotions, it is good for us to understand how some of these emotions affect the trader's reasoning.

For this, I will be explaining three of these emotions, which are; Fear, greed and Happiness.

Fear

The most common type of emotion encountered when trading is fear, and what normally causes this emotions is trading with huge amount. When a trader trades with big money, there is this feelings of losing out everything, which will cause the trader to make some unusual decisions. Most people trade without knowing the trends of the asset. They trade with big amount and end up feeling stressed on how to manage the risk of losing all, and by doing so, they tend to make decisions that they would not have make if the risk was bearable.
Another way fear occurs in the market is for a trader to jump into the wrong trade.... i.e jumping into trade that doesn't match with what you have planned.

Greed

This type of emotion is never easy to do away with. It is mostly based on the trader's instincts and not rational thinking. Most traders won't trade when it is right just because the profit is small, but will wait for a longer time just to observe a trade that will yield more profits even without considering the risk involved.
Trading big, feeling you want to earn bigger can easily cause your downfall within a blink.

Happiness

This is the type of emotion every trader will want to experience when trading. It is good that a trader have that excitement or happiness in him when trading in the trade, according to how he/she planned it, whether it's negative or positive.
The reason for this emotion is to be sure that the trader is in the right trade. He/she can be losing or winning, but that doesn't matter as long as they are in the right trade with the right plans.

How I plan to Build a good trading psychology.

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Before starting any type of business, it is required of you to lay out your plans on how to intend to go about it so that you can minimize your loses and keep away negative feelings. There is the saying; "when a man fails to plan, he plans to do fail." This is very true in trading today.

Individuals just want to make lots of profits without checking if there's anything that could hinder there plans. They enter into trading based on what they hear and not what they observed.
We are not saying that all traders should follow one way or strategy if they want to make profits. There are lots of ways and strategies that can be used by traders to achieve their targets.

For this reason, I have outlined four ways that I will use in order to build a good trading psychology.

Lay out your plans and strategies.

You all will agree with me that for every business you enter, it is good that you have already laid out your plans in how you want to undertake such business and achieve your desired goals. First, to avoid any bad or negative emotions when trading, it is normal for the trader to have his written down strategies and how he/she plans to trade. And not only having a strategy, but adhering to it and making show you follow just what you've planned. So with the strategies in place, this will be the first step in building a good psychology in trading.

Only trade in the right market.

Sometimes, you'll have this feelings of not trading today, and another would lure you to look into the market and put your funds in it for trading. The logic in this is that; you shouldn't trade when you don't feel like, and also, when it doesn't go according to your plan. It is good to observe the wrong market and try to avoid them in order to save yourself of the bad and negative emotions. Avoiding wrong trades can help you develop a good trading psychology.

Minimize your trading size and trade moderately.

There is this saying; "Trade only what you can afford." When trading, you should only stake what you can afford, meaning you shouldn't use almost all your funds in trading. As a trader, you will be exposed to so many risks daily, but it is good that you have the capacity to handle them, and one of this is reducing your trading amount. Most things that causes fear in trading is dependent on the size of money you used in trading. If you have $20,000 in your account and you trade with $2,000, the fear of losing your money, even if the trend is against you, would be that much compared to when you traded with $15,000. This is a wonderful aspect in building a good trading psychology. It will help minimize risks and save you from bad emotions.

Always take a rest and be logical.

In the course of developing a good trading psychology, it is good that traders take a break sometimes. It is good for us to relax and be logical before entering into any type of trade, making sure that we don't go into this trade because of our emotions but because of our logical and rational thinking of that asset.

Taking a break is a good sign of preparing yourself and your brain. It gives you the opportunity to redraw your strategies and lay out your plans in such a way that it will favour you.

With the four ways I have listed above, I am sure that they can be employed by traders to ensure a good trading emotions and to reduce or do away with some bad feelings while trading.

Develop a simple Trading goal and how you plan to achieve it.

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There is always one target in the minds of every trader, and that is making profits. In order to make this profits, there are certain things that should be put in place to achieve them; These are your goals.

Under this section, I will explain some trading goals and how to achieve them successful.
While setting these goals, traders should make sure that they are realistic ones and can be achievable when adhered to.

These goals are;

My profit goals and controlling the risks involved.

Profit goals.

Every business has a Profit goal(s). Always remind yourself that you have a plan and strategy in place that you should follow in order to make profits.
Don't work on profits based on greed, but based on what is realistic. A couple of little returns per month is enough.
When you set a profit goal, you should know what you will be expecting, this will in turn help reduce your stress and emotions towards your trade. And at the same time, it will yield impactful results for you.

Controlling the risk involved.

In order to control my risks encountered when trading, I will ensure that I have a percentage which I will use in trading based on my account balance, let's say 1.5% or 2%. This will help minimize my loss and also, give me more chances to understand how the market works.
If a trader keeps trading with irregular or impromptu ideas, he/she might end up losing all in the market, that's why it's good to have a regular stake percentage which is based on the amount in the trader's account balance.
This doesn't ensure a win output all the time, but at least, you'll be happy you sticked to your plan.

Conclusion

In summary, this homework has helped me in understanding how to manage some of these negative feelings gotten during trading. Having a good knowledge on how to handle these emotions and feelings when it comes to trading is very good. Having this knowledge also gives traders the ability to adjust in the market and on how to manage some unnecessary mistakes. Also, most traders have the opportunity of learning these things but will still neglect it. These knowledge is good as it teaches traders in how to make more profits while reducing the risks involved.

Appreciations

This is the second week for the academy and I'm truly enjoying it. It has helped me in understanding some things I had no knowledge about before. All thanks to @venom-21 and @chinonso01. Thank you all for reading my content.