Successful stock trading requires understanding trader’s psychology apart from knowledge and skill. Market scares traders many a times. The trader needs to master the art of managing greed and fear. The fear factor is the major spoiler of successful stock trading. The biggest fear of a many traders is fear of losing money. Many of the traders, irrespective of their financial position, are uncomfortable with losing even single penny. Study suggests that fear of losing money is stronger than the joy of gaining. Fear of losing may not necessarily due to personal experience of the trader. It can be occurring from the bad experiences of some known persons or the story heard. The negative move of the traders is act of herd mentality. Second fear of traders is fear of missing the gains. Many traders make mistake of entering the market at the peak, expecting further raise, without study. Third mistake trader make is bearing the load of non-growing stocks. In such scenario becomes prudence to sell those non performing stocks and enter other potentially strong stocks.
The secret to successful trading is not to panic and not to take impulsive decision. Trader should have patience. Whenever there is market crash it is opportunity to buy attractive value picks.
Following are traits of successful traders when market scares.
- Each individual trader has individual trading styles which suits him according to his money personality and time availability.
- Learn from the past mistakes to change the trading strategy.
- Be patient.
- Diversify portfolio.
- Keep balance between greed and fear.
- Take home certain amount of gains systematically.
- Plan the exit strategy while entering the trades keeping in mind worst case scenario.
- Keep calm and composed temperament which distinguish successful trader from the herd mentality traders.
- Get rid of gut feeling.
Some believe keeping cash is safest. However, it is apt to know inflation eats the value of cash over period of time. Stock market is the best place to get inflation beating returns.