Blurttradinghub Season 1 Week 2: Trading Psychology Part 1 (Intermediate Course)|| By @hazqdee

The Image was designed using Pixellab

It's another class and another welcome to my assignment entry on the topic of Trading psychology for the intermediate class by the lecturer @venom-21. I will be giving answers to the questions below.

Explain what you understand by trading psychology.

One of the important factors that determine the success of a trader in any market is the trading psychology involved.

Source

However, this is one of the most commonly overlooked factor, because many traders particularly newbies believe that learning the trading strategies is enough to be successful in the market.

But we have come to know that this is not always the case, and one of the factors responsible for this is the topic of discussion called trading psychology.

Before explaining further, these are two words stringed together so it would be valuable to better understand what each word means and thus be able to see how the relationship between them is formed.

Trading in whatever form it is being involved in simply entails any form of exchange, it could be about buying or selling but the main goal is usually profit maximization.

Psychology on the other hand involves the emotional and usually the mental situation or condition something is in. This can affect the success or failure of a lot of things and one of them is trading.

By joining the two initial definitions, we see that trading psychology is the mental state a person brings into making a transaction or a trade. The research, decision making and finally making a trade are all affected by the capacity to properly control ones emotions.

In essence, as a trader you could understand the best trading strategies and use of technical indicators for trading, but if you don't set realistic goals of what can be risked for certain markets. You might find out that you begin to make bad trading choices after a number of losses.

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

For this question, although there are a lot of important emotions i will be discussing the three listed below

• Greed

• Pride

• Happiness

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• GREED
We all know that what a human wants is almost insatiable, but when we talk about what a human needs then there is a limit. Hence greed means exceeding the needed limit for something. When as a trader you already set risky goals then possibility of failure is high.

For a trader who wants to use fifty thousand naira to make ten million in just two weeks. He is bound to make a lot of risky trades just to meet up, and this uncontrolled greed will make him loose all his funds on trades that are not well researched.

We can thus see that a lot of greed is not a good emotion to bring to the trading market.

• PRIDE
Pride could be a feeling of self accomplishment or also feeling that your accomplishments surpasses those of others.

Pride can be useful when trading, because a trader should be confident in his approach to trading. Where this becomes an issue is when he or she refused to learn and improve on mistakes.

The feeling that your strategy has to always be the best, whilst forgetting that the trading market is only predictable up to an extent and the rest is a risky venture.

Being stuck on certain techniques while refusing to evolve and learn from other traders can be a road to your trading downfall hence causing you to loose funds before the realization sets in.

• HAPPINESS
This is something that affects a lot of other decisions in life. A happy trader is very likely to make better choices compared to an unhappy one. A pleasant mood is an open avenue for clear headed decision making and translated into money making.

Explain How you plan to Build a good trading psychology.

One of the things that can truely safeguard you from falling into an emotional trap in trading is to make a planned out goal and strategy to achieving it.

Planning can never go out of fashion, as truely successful achievements were mostly thoroughly planned steps at the initial stages.

So firstly I identify my emotional strengths and weaknesses. For instance someone who is quick to get angry has to learn to walk away from certain situations.

A greedy individual has to set limits to trading, if I make profit thrice concurrently i take a break and survey the market once again. Or if I loose in the same manner i must not trade with amounts above certain levels.

Once certain rules have been properly put in place, it helps to control excesses whilst also encouraging the positive emotions as well.

I do not want to loose funds but perhaps i haven't made any profit. Instead of getting angry and making a risky trade, it would be wiser to stop and access the flaws in my strategy before i can make another trade. Accessing my mistakes gives me a point of view I might not have seen when i was still in an angry mood.

Develop a Trading goal and show how it can be achieved

I have a Capital of 60000 Nigerian naira
My Goal is to make a Profit of half which is 30000
The time frame to achieve this goal is 1 month

Firstly what I do is decide how much profit I make daily and weekly.
Daily profit = 30000 divided by 30 = 1000 naira
Weekly profit = Daily profit × 7 = 7000 naira

So I make sure I never stake above 3000 on a single trade, because loosing twice or thrice in a row means that I have about 48000 - 51000 to continue trading.

No matter how good or promising the market looks, the goal is to stake only maximum of 3000.

Then when staking i only stake on market with probability of making profit at above 65% so any ratio less than than will be avoided. By doing this I am giving myself a 35% chance to loose money.

I believe using this strategy I can make safe trades and still achieve my goal.

Conclusion

I have come to see how much of an important role our emotional situation plays in the success or failure of a trade.

Understanding your psychological strengths and weaknesses can be on the advantage for a trader.

I will be expecting the lecturer @venom-21 review especially pertaining the last question for this lecture.