Bro if u are interested in human psychology I hav one problem hahahahaha not mental but on mkt .listen when i am in profit in any trade try to book as early as possible due to fear .& when i m in loss keep on reducing stop loss thinking that mkt will bounce now Really very upset with this habit of late booking loss .Can u tell wat to do to improve this habit of mine n i think many more will come on this thread with the same problem thnx for picking a good problem
These things are very nature of Human Beings which though could be restricted but its very very difficult to erase them. I have been trading now for more than 4 yrs. and my best trades have been those where both and hope have been put onto a bin. Yes I do loose even when trading without emotions but then I can bear the loss by saying " These are markets, I cannot win every time".
But I must admit that sometimes I do enter or exit on my hunches and end up loosing money mostly, so the punishment involving money is enough to make me more cautious next time.
Anyways there are some methods that I have used over years to reduce Human emotions as much as possible from my trading. It may help you somewhere or atleast provoke a new thought. Here we go ;-
1. I have a diary with me where I have written commonest mistakes that I usually make like Getting impatient, moving stops before getting confirmation, Not waiting to book my profits at the hitting of Trailing stoploss, etc, etc.
Now every time I end a trade I will note that how many mistakes I made. Then at the end of month I will count the mistakes. Now let me tell you this counting itself is a great exercise, this will make you feel ashamed and might actually help you. My aim is to decrease the mistakes every month
2. I have been able to get the most profit out of my positional trades when I am not watching the quotes all day long. Yes it really helps not to watch ticker all day. You will end up thinking all the stupid things like " I think we will have correction here, I will try to get in at lower prices", " I think market is going to hit stops, I should take as much profits as I have got" , etc, etc.
Simple solution is dont watch the Ticker just keep on updating stoplosses as the prices move in your favour by looking at charts and dont try anything else just have some snacks and chill. Believe me after some days your charts will start talking to you, yes they do.
3. Dont enter with too large a position, start very light and then add gradually only if prices move in your favour. This will do 2 things , firstly Fear is eliminated as the loss even if taken is very small and you would not mind taking it , secondly greed would also be taken care of as the initial position is very small and you would not like to run with small profits.
4. Enter 3 or 4 stocks at a time and add only to those which are behaving well. E.g You entered 4 stocks simultaneously out of which 2 are showing you profits and 2 are showing loss after 3 days, take your money out of 2 losers and put it in winners, you will see how profitable this slight change will make plus you will not be carrying stress of holding loosing positions.
5. We all go through good and bad phases during our trading career, dont think that bad times can be avoided but yes you can make them less painful. I use a variable Money Management strategy. Say if I usually risk 2.5% on my trade, I will keep on reducing 0.1% risk everytime I have a loosing trade, if I reach 1% level I will take a break for month. This will keep you out of bad months when markets themselves might be turning choppy.
There are many more things that I practice myself, will come up with them later
Happy Trading