Emotions That Affect the Psychology of Trading

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.