With a strong trading plan, you’ll understand what trades to place, when, and most importantly, why. It takes a lot of stress out of your day-to-day trading and gives you something to measure your results against.
Step 1: Decide on your trading timeframe
The timeframe you choose to trade within will affect everything, from how often you make trades to what kind of analysis you apply. In other words, you need to decide what type of trader you want to be (long-term trader, short-term trader, intraday trader).
Step 2: Choose your trading indicators
Many traders prefer to use two or three different indicators — and get a positive signal from more than one of them before making any trade.
Step 3: Realise how much risk you can handle
Some of your trades will be losers — that’s just a fact of trading. You can control how much you’re willing to lose on each trade and how you can mitigate your risks.
Step 4: Decide when you’re going to open and close trades
This is also known as defining your entry and exit points — it’s the fine art of timing your trade to maximise your potential profits. You should define a target for each trade and exit at that point (taking profit). Equally, you define the maximum loss you’re prepared to take and set that as your (potential) exit point (stopping losses).
Step 5: Write down your plan and stick to it
Make sure you write down your plan. It may sound silly, but picking up a pen and committing your plan to paper will make you a more disciplined trader and more likely to stick to the plan you’ve painstakingly created.
What is inflation?
Inflation is a sustained increase in the general price of goods and services in an economy over time. The concept is that the price of things increases as time goes by, with the result that the same money is no longer enough to buy a particular product or service.
How is it measured?
A chief measure of price inflation is the inflation rate, the annualised percentage change in a general price index over time. Inflation is therefore expressed in a percentage indicating how much a nation’s prices have increased, which is called the Consumer Price Index (CPI).
What creates inflation?
Various factors can contribute to inflation. It is challenging to pinpoint precisely which aspect has created inflation because various factors constantly influence prices. However, several circumstances are typically present when prices rise, which we can group into demand-pull and cost-push inflation.
How does inflation affect trading?
Inflation can affect trading in many ways. For example, when inflation is high, the cost of goods and services increases, leading to higher prices for traders.
Finally, high inflation can lead to currency devaluation, making exports less competitive and imports more expensive, affecting trade flows.
Inflation can affect traders in several ways:
01 Higher prices
Inflation can increase the cost of goods and services, increasing consumer costs.
02 Uncertainty
High inflation can create uncertainty and instability in the economy, making it more difficult for traders to decide when to buy and sell.
03 Currency devaluation
Inflation can lead to currency devaluation, making exports less competitive and imports more expensive, affecting trade flows.
04 Lower purchasing power
Inflation reduces money’s purchasing power, making it harder for traders to afford the costs associated with trading.
05 Interest rates
Inflation can lead to higher interest rates, making it more expensive for traders to borrow money and reducing demand for certain products and services.
We figured out the emotions that affect trading, but how to work with them?
These six tips will help you!
1. Practice with a demo account
You may still need to feel ready to invest your hard-earned money. This is just fine! Then open a demo account. You can practise real-time trades without the stress and emotion that comes with real money.
2. Treat your first losses as learning rewards
Nothing is better than opening a real account — even after several months of practice. Using real money can ignite your trading emotions! You may panic and exit too early when one of your holdings starts to fall.
In any case, consider your initial losses as tuition fees in the marketplace. This is part of your trading education.
3. Observe the habits of successful traders
There is no need to reinvent the wheel. Instead, learn from successful traders who have known how the market works for years, if not decades! Adhitan mentors are just like that. They spend time learning the basics, working on a constant search for new knowledge and research. They set goals and keep growing.
4. Set stop losses to protect your account
You must set stop losses in advance. No excuses! The market will not bend to your will. It can (and often will) do things you don’t expect. This may be contrary to reason and everything you have learned. Accept the random nature of the market.
5. Choose your favourite strategies and stick to them
Finding patterns is an essential part of trading psychology. Patterns tend to repeat themselves so identification can help you in your trading. You must find what suits you: pick two to five of your favourite strategies, practice recognizing when they occur, and stick to them.
6. Learn to read news catalysts correctly
You can do perfect technical analysis and still lose if you don’t consider news catalysts. Most people read the news and assume it will be the catalyst. But by the time you read them, so will all the other traders. And they have already acted on this matter.
A more thoughtful approach is to do the opposite. Check stocks first; then look for a news event that explains the stock’s performance.
To become a better trader, you need to master the psychology of trading. Nothing can destroy your trades faster than emotions.
Greed and fear are two of the most common emotions that affect the psychology of trading. It works both at the individual level and for the group as a whole.
A shopping frenzy can set in when a group of merchants gets greedy. Thus, the market remains optimistic. Also, when fear arises, the trend can quickly turn bearish as panic selling occurs.
Greed
Greed is a strong motivator. Without greed, you wouldn’t have the courage to buy shares. Especially penny stocks, right? Greed also wakes you up in the morning and makes you not give up. But sometimes that’s why you take too much risk.
Fear
Fear of failure is a fairly common emotion. We all want to succeed, and we want to feel our value. But this can add unnecessary pressure to our trading game. Sometimes the fear of success can have a significant impact on a trader.
Four Fears of Trading
To be able to confront your fears, therefore, you first need to learn how to identify them.
Fear №1: Pride
It’s nice to be proud of a job well done. But sometimes, we pride ourselves on our ability to achieve big wins. This can be problematic as we cannot control the markets.
Fear №2. Happiness
Happiness is a virtue, right? Sure, but that can also lead to laziness. If we enjoy one trade for too long, we may miss out on some great opportunities. And if we are accustomed to disappointment, we may be wary of the unfamiliar feeling of success. It is crucial to find the golden mean here.
Fear №3. Anger
Anger, like pride, can convince us that we know trading processes better than the market. We risk making a bad trade worse if we cannot accept market rules and get angry at them for disagreeing with our omnipotent knowledge.
Fear №4. Impatience
Good things come to those who can wait. But let’s face it, staring at our screens all day can be exhausting. It is essential to stay focused and give your trades time to win. If you exit the game too early, you may miss out on the big breakthrough you were hoping for. Of course, it takes a lot of practice to balance fear and greed.
