Art Of Trading Psychology

Many people have asked me how to forecast the trend base on the results i show in my charts and also wonder how many trades do i usually do in a day.

The following image below is one of the trades i have done recently.

On average I do 20-30 trades a day.

My highest is over a 100.

During the economy downturn, i have took a break from the market as it is too dangerous.

You can't beat the market because there are always sudden changes in the economy and market manipulation involved everyday.

But that doesn't mean you can't profit.

You can stay to the fundamentals and technical analysis and put yourself in a better position in the market.

To me as a trader and investor, it is very important to have a enter and exit plan.

You cannot buy or short a stock blindly.

The market is not a gambling den.

Based on logic and psychology, we all know that meme stocks and certain stocks that are volatile always have sudden changes, especially when stocks are hyped. The peak is only logical to short as a decline is at least a 80% probability as a pull back will definitely happen as the stock value is constantly changing due to the inflow and outflow.

But of course the 20% can happen, which means the stock can fly to a new high, but i would always stick with the highest probability.

For trades, i will limit my losses to 7% or less per trade.

For long term investment, it varies.

I have been watching the market and seeking opportunities everyday. I also watch a few stocks understanding the trend, potential and the volume of trades.

My sleeping time is usually in the morning, Singapore time. As base on Singapore time, I will end my trade session at usually 4am. Unless there are other opportunities.

If you are a long term investor, then there is definitely no need for you to watch the stock market like I do. You just need to watch the companies you invested in, following up on the news of it's changes, making changes of your position whenever necessary.

Because as an investor, always remember.

You are not buying a 'stock'.

You are investing in the company.

You are buying companies.

I do both long and short. As i invest in the potential of the company going long, i also trade and short other stocks.

With regards to my trading style and how i trade it varies.

If it's a meme stock, i'm not gonna swing trade.

I'm gonna go for a decent looking price, at the average or a little above the support level and enter. When it comes to selling, I don't have to take a very high profit but at least at a price i deem it will minimally reach. Setting unreasonable expectations of prices makes one very disappointed resulting in either FOMO or missing great opportunities.

Example of FOMO:

When Person A bought the stock, it was $1 per share and he sold it when it was $1.5. That is a 50% profit but eventually the share prices went up to $2.

Person A was unsatisfied was in FOMO so he bought the stock again at $2 and when the price dropped, he became emotionally affected and cutted his losses.

Example of missing great opportunities:

The average cost of stock A is $1.

The support level is $0.5.

Base on technical analysis the stock can potentially go down to $0.2.

When the price finally arrived at $0.6, person A chose not to buy because he was afraid of losses and was greedy to profit more, hence he waited for a lower price. But the lower price never came. He missed out on an opportunity.

So what is it that i'm sharing with you guys?

I'm telling you guys to stay in the middle.

Don't fear, don't greed.

As long as it's a profit, it's a profit.

As long as you are buying below the average price, it's a steal.

I'm not telling you to disregard the economy changes and other fundamentals, but you should stay at the greyline.

Staying at the greyline, in the middle, gives us the safety we need. Protecting us from opportunities loss, losing money because of greed from FOMO. Example: Buying back at high prices because you FOMO.

Okay, so after a long explanation of how i trade.

I would say that trading psychology plays a very big part.

So here comes the main point of the topic 'Trading Psychology'

So what is Trading Psychology?

Trading psychology is the emotional component of an investor's decision-making process, which may help explain why some decisions appear more rational than others. Trading psychology is characterized primarily by the influence of both greed and fear. Greed drives decisions that might be too risky.

Trading psychology is the linchpin that holds your trading strategy together. Once you master your mind, the rest will follow more naturally. Trading psychology is the hidden gem of successful trading that often goes unnoticed. It's the element that separates the elite traders from the rest.

Trading Psychology comes in 3 components.

60% Psychology

20% Money Management

20% Trading Strategy

When it comes to trading, trading psychology comes in hand with trend analysis.

With the right emotions + analysis = better probability of a trade turned out right.

So what is Trend Analysis?

Trend analysis is a technique used in technical analysis that attempts to predict future stock price movements based on recently observed trend data. Trend analysis uses historical data, such as price movements and trade volume, to forecast the long-term direction of market sentiment.

When it comes to trading and investing, mindfulness is very important. As being mindful, you are aware of certain factors that will affect your trade/investment. The world is changing every second, in a split sec, non logical bullish or bearish changes can happen while driving againts all logical factors. So it is very important to be mindful.

So what is Mindfulness?

Mindfulness is the awareness that emerges through paying attention, on purpose, in the present moment.

When trading psychology and technical analysis comes together, you have the best probability but when you disregard stock fundamentals, you may end up in a loss due to sudden setbacks.

So what is Stock Fundamentals?

Stock fundamentals are key metrics for a company, such as cash flow and return on assets (ROA). Analysts often perform fundamental analysis to analyze a stock by looking at its fundamentals. This involves looking at any data which is expected to impact the price or perceived value of a stock.

So psychology, technical analysis and fundamentals are very important.

It is the key to one of the best possible trades.

As we come to the end of the article, i wish everyone the best. May we all improve and make the money. [Miser]  [Heart]  

Always Practise Mindfulness. 

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