Showing posts with label trading stock a mental game. Show all posts
Showing posts with label trading stock a mental game. Show all posts

Saturday, July 31, 2010

What skill is really needed for a trader in stocks

Trading in Stock Market is one of the toughest mental game in the world. Very few succeed in the game and majority of traders lose in the markets. What makes the difference between a loser and winner in stock market. Since trading stocks is a mental game, those who are having good emotional control over them win in the stock market.

If anybody takes decision impulsively instead of logically, he is likely to end up in loss. What most trader lack is, the ability to cut loss when it is small and the ability to hold their winning position till it gives a good profit. Lacking of both these qualities lead to loss in stocks.

The first and most important of this is, the ability to cut down their loss when it is small. Once you take a position, and if it is against you, you should not live on your wish but you should act on what your technical knowledge tells you. If your stop loss levels are triggered you need to book loss when it is small. Here always comes your ego. It will tell you not to close your position as if you will be right. Those who over come this ego, will certainly close their position. So one main quality a trader should posses is, he should overcome his ego.

The next thing is booking profits early. Even though it is not as evil as running the loss, it too have the same financial disaster. If you couldn’t make big profits in the long run, then what is the use of trading in the markets, that too with big risk associated with it.

Be a trader who book loss early and allow to run your profits. As legendary trader Jesse Livermore said ‘ Sitting right and sitting tight ‘ will give good profits in the long run