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Self-Mastery in Trading

In the world of trading, self-mastery is the key to success. The two emotions traders must be most wary of are fear and greed. Many traders miss golden opportunities because they cannot control these emotions. Let's discuss how each affects trading and how to overcome them.

Fear and Greed in Trading

Fear

Cautious traders are often dominated by fear. They fear losing and frequently exit positions prematurely, causing them to miss out on significant opportunities and potential profits. Fear can limit your profit potential and cause hesitation in decision-making.

Greed

Conversely, greed is the urge to quickly gain profits. Greedy traders tend to take every opportunity that comes up and often invest all their capital in a single transaction. Greed can lead to overtrading and substantial losses if not controlled.

Overcoming Fear and Greed

To become a successful trader, you must overcome fear and greed. Here are some attitudes you need to adopt:

Set Realistic Goals

Every successful trader has clear goals. These goals help them stay focused and work effectively. Ensure your goals are:

  • Realistic
  • Achievable
  • Measurable

Learn to Accept Losses

A common saying in trading is "learn to accept losses as part of the game." In any business, there will be times of loss. The same is true in trading. Accepting losses is an attitude you need to develop. Do not blame others or the system. Take responsibility and learn from those losses.

You Deserve Big and Quick Wins

Many traders feel they don't deserve large profits in a short time. This feeling can cause them to let their profits diminish. Understand that big wins are the result of your hard work and investment. You deserve them.

Transaction Rules

Creating rules for yourself based on good habits you've learned is crucial. Some transaction rules to implement include:

  • Start with a prayer or a calming ritual.
  • Stop trading once you've met your target.
  • Read extensively about fundamental analysis.
  • Be disciplined in executing your trading strategy.
  • Ensure sufficient exercise and sleep.
  • Prioritize tasks.

Implement Wise Stop Losses

Using stop losses is a wise preventive step. Set your stop losses based on:

  • The predetermined transaction risk.
  • The size of the trading channel (use Bollinger Bands).
  • The time frame you are using.

Be Objective

An objective trader will accept all inputs and consider them carefully. According to Mark Douglas in his book "The Disciplined Trader," the characteristics of an objective trader are:

  • Does not feel pressured.
  • Does not feel afraid.
  • Does not feel rejected.
  • Sees no right or wrong.
  • Confident in their judgment.
  • Analyzes the market without being influenced by their position.
  • Focuses on price movement, not money.

Avoid Revenge Trading

Never trade with the aim of seeking revenge. Anger and disappointment can lead to irrational trading decisions and greater losses.

Self-mastery is crucial for success in trading. Controlling fear and greed, setting realistic goals, accepting losses, and being objective are some essential steps to take. With good self-mastery, you will be better prepared to face the challenges in trading and achieve success.

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