The Stock Market

The Stock Market,  and a few trading psychology myths

In today’s article we explore the stock market as it relates to  trading psychology and  some associated myths. Investment psychology is a concept that greatly influences a stock trader’s ability to develop and maintain consistent trading success when investing in stocks and particularly in the fast pace of trading online. Do not fall prey to any myths!

1. There are natural born traders – While certain characteristics of a trader’s personality may be helpful when investing in  stocks, there are no natural born traders. Genius traders understand the amount of hard work, discipline and dedication that is takes to become a successful trader and they know that the hard work never stops.
2. You have to be a genius to become a genius trader – Not true! While it may be helpful to have a higher than normal IQ, it doesn’t guarantee success. In fact, a high IQ can actually be an obstacle. While you must have the investment knowledge required what is more important is to have emotional intelligence in the stock market. Your behavior, personality, and emotional intelligence are actually what determines your potential for success, not your IQ.  (curious if you are trading to the best of your abilities? See the Genius Trader Questionaire)
3. You must learn to trade without emotion – Not only is that untrue but it is impossible. Humans are emotional beings and they are for a reason. While you must have control over your trading emotions, you wouldn’t want to, nor could you, completely rid yourself of emotions. Our emotions can act as triggers just as technical indicators can act as triggers that a decision needs to be made. What is important is how you react to those triggers, whether they are emotional or technical. In summary, pay attention to your emotions, understand them, but don’t let them control you.
4. Trading has to be stressful – Yes trading can certainly be stressful, but that doesn’t mean is has to be. Rather than looking at the big picture traders must learn to take things in stride. Focus on what you can do today, and what is within your control. You can control your trading plan, your trading rules, trading strategies, and your behavior. If you make a mistake, evaluate why that mistake was made. Was it within your control? If so, then document in your trading journal what you did wrong, and learn from it. Don’t let it stress you out, but instead channel it into something positive. It can be said however, that if you don’t have a trading plan, you will certainly be very stressed out!

Martin offers private group or individual consultancy face to face at his Central London office or over the telephone. In addition to helping clients understand how to implement trading strategies he assists clients to attain a psychological state that will enable them to trade calmly and effectively. Drawing from his own experience as a successful trader over many years, Martin helps clients to achieve peak performance trading through self awareness, understanding emotional and cognitive blocks combined with his knowledge of how the markets work.

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