Mastering Trading Psychology: The Difference Between Winning and Losing Traders - Bulls on Wall Street

Mastering Trading Psychology: The Difference Between Winning and Losing Traders

In trading, you are your own worst enemy. Fear of missing out and chasing. Fear of taking losses because you’re scared. Not taking profits because of greed. Revenge trading because you want to make back what you lost. No matter what stage in your trading journey you are in, trading psychology is the biggest obstacle for traders to overcome.

Today’s article will show you some of our favorite strategies to overcome some of the most common psychological issues all stock traders and investors face:

Combating FOMO (Fear of Missing Out)

FOMO is the most common reason why we buy stocks to high, or short to low. One of the worst feelings in trading is watching a stock make a big move without you. For some traders, it’s even worse than taking a loss! The stock market is so big, and there are so many stocks moving every day, you will always be missing an opportunity. You have to learn to combat FOMO to become a consistently profitable trader.  This video lesson will help you learn how to overcome FOMO:

Sizing Positions Correctly to Avoid Fear 

Position sizing plays a major role in trade management. One of the most common mistakes traders make is sizing their positions too large. It puts them at a bigger risk of taking a massive trading loss and also makes their trade management much worse. 

When you are trading huge size, you will take profits at the wrong places, stop out either too early or too late, and generally be a lot more emotional in your trading. Reducing your size will actually make you MORE money, because of how it reduces emotions and improves your trade management. This video lesson will show you the importance of sizing positions correctly, and how to break the bad habit of oversizing:

 Emotional Attachment

One of my favorite trading quotes: “Trade the ticker, not the company.” One of the biggest issues traders have is an emotional attachment to the stocks they trade. Their attachment causes them to mismanage their positions. These traders will usually either fail to take profits when they have them or fail to stop out of their positions when the loss was small and manageable. Here is how you can combat emotional attachment in your trading:

How to Scale-Out of Positions to Reduce Greed

Timing exits is one of the trickiest parts about trading stocks. Selling too soon and missing the big move. Selling too late and watching a nice unrealized gain come all the way back to breakeven or a loss. I’ve found the best exit strategy to manage these two problems is to scale out of your positions, which means taking partial profits (½, ⅓, ¼). This video lesson will show you how to scale out of your positions correctly, and manage greed while you’re in a trade:  

Revenge Trading: How to Stop Forcing Trades

Every trader’s reaction after taking a trading loss: “How can I make this back”? Most traders jump on the first stock that moves, take another loss, and then end up further in the red. Next things they know, a small manageable red day turns into a day that undoes weeks and months of green. The best traders don’t let trading losses affect their trade selection, and don’t get emotional. Here are some of the best strategies to combat revenge trading:

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