Trading Psychology and Mental Stability
Human feelings are the psychological interpretation of different mental conditions, which drives the way a human acts naturally or irrationally. Every aspect of human life requires mental focus on things or tasks to be done, that are being derived from the psychological dispositions of humans.
Humans have a complex system of sentimental discharge when it comes to decision-making and thought processing, be it as simple as looking at something or engaging in a mentally challenging task.
Psychology is a vast field of human behaviors and mental attitudes towards how someone tolerates ongoing occurrences and situations.
Traders also go through different emotional states while performing trades in the market or thinking of open trades, such as excitement, anger, sadness, happiness, anxiety, fear, greediness, confidence, regret, calmness, and many other associated feelings.
Trading Psychology provides us with the knowledge of a trader's thoughts, feelings, and cognitive responses towards trading activities and their outcomes.
A trader's mental approach to trading varies according to his/her expertise, experience, and financial stability. New and young traders often think of trading as a quicker way to earn big money with small funds, but when they enter the market and place a trade they tend to realize the actual merits and demerits of trading.
The majority of new traders put themselves in a gambling situation, especially in leverage trading, and lose their precious funds within a few seconds when a trade loses its margin. These situations develop anxiety and anger among novice traders, and a strong feeling of failure and discomfort arises in their minds which leads them to take desperate actions and mental instability starts to trigger.
A similar situation occurred with Alex Kearns, a 20-year-old college student, who committed suicide after mistakenly understanding that his Robinhood account had a whopping $730,165 negative balance. As sourced from CNN Business, Kearns tried to contact Robinhood to learn about the negative balance but did not receive any human response except an automated email.
Indeed, this is heartbreaking news in the trading community, but also gives us a deep insight into trading insecurities and how trading firms provide their customers to trade more than they can afford. The case also teaches us that the consequence can even be fatal due to depression and fear of losing money and owing to debt.
Experienced traders often break up due to their overconfidence, opening so many trades in a volatile market drains their funds quickly through stop losses and margin trading. This kind of sudden shock causes long-term mental stress which leads them to other psychiatric problems in the long run.
Sometimes, the market itself becomes the cause of trouble for traders, as traders keep their investment in the form of stock securities or cryptocurrencies, the prices become so low that they could not close the trades and then a long arduous wait starts in hope of the price escalation someday. This kind of onerous trading situation put them in financial problems, and some traders even take loans to cope with the situation or even start over to earn more profits.
We can relate this situation to a news published in coincu.com about a young person who trespassed into Terra Labs co-founder Do Kwon's apartment compound after alleged Luna and UST price falls, and he also claimed that many devasted investors committed suicide during the interrogation
Trading is not for everybody, but everyone thinks of earning passive income through investing in securities and crypto. Fear and greed factor also influences traders to enter or leave the market and impacts their decision-making to accept the risks or to hold the reigns for not putting their investments in trades.
To become psychologically strong, it is important to conserve good mental stability by becoming literate about trading and market conditions. A knowledgeable trader would have less fear and anxiety compared to an inexperienced trader.
The trading experience does not come without practicing trading, but learning how to trade and how the market works helps overcome mental issues that arise for an inexperienced or a novice trader.
In conclusion, it is very important to study trading techniques, understand market behaviors, and practice with small investments that one can afford to lose. Profit and loss are two critical factors of the trading business, treating it like gambling as a matter of luck is not the way of a trader, it is about understanding and knowledge about trading.
Author: emaxisonline
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