Trade Stock Indices

Psychology of Trading Market

The reason/explanation why 90% of traders lose can be summed up with two words:

Indices Trade Psychology

Many people fail on the psychology front and only a few take the time to transform their mindset. The reason why most people make losses isn't that they can't beat the market, but because they do not have the right mindset. Indices psychology is all about transforming your mindset.

In Indices, you must first master your method and then put in many hours of studying how the market works.

The market is too complex & there are many factors & aspects that have a huge impact on the daily fluctuation of market prices. Traders should understand how the online market works through studying trend characteristics and also how these fluctuations/oscillations occur.

Psychology and Emotions

In the market, winning is a matter of the mind. Studying the psychology of the market takes into account what influences others - including the mass psychology of the people that trade indices on a daily basis. Anything involving winning or losing large amounts of money becomes highly emotionally charged. Winning depends on knowing your own mind & also understanding how mass psychology moves the prices.

In most cases when traders invest in indices, they invest more than just money - they make an emotional investment. This is where most go wrong; being right becomes more important than making money. When the transaction goes wrong since they have already made an emotional investment they let their decisions to be ruled by their emotions & they hold onto their losing trade positions in the hope that it will bounce back. Unfortunately their losses become greater and they find it even more difficult to close their stock trade orders.

Even when traders make money and let their emotions get in the way, they either become greedy or over-trade.

Indices psychology will form a good foundation for trading profitably - it's about learning how to keep emotions out of the picture, & not to letting these emotions control your transaction decisions - trader behavior changes very little with time, as humans will always make the same mistakes over and over again.

You can learn how to control the 3 most dangerous emotions that tend to cloud judgment & cost you profits. These 3 emotions include:

  • Greed
  • Fear
  • Hope

6 Tips for Transforming Your Mindset

1. Define your goal.

There are many important Indices questions that you need to answer before jumping into the market. Developing and defining agoal will give you a begin point to your success.

2. Keep it simple.

Some people use more than 5 indicators on one chart analyze & to inform them of their next move with no success or even breaking even. The thing is that more indicators don't equal more accuracy.

3 most powerful tools to use are:

  1. Candles (buyer & sellers behavior),
  2. Price action (such as support & resistances), and
  3. Trend Line (up, sideways or down).

3. Don't get emotional.

If you are attaching emotions to your stock trades because there is real cash involved you need to change your mindset and begin following your trading plan. If you're a beginner with no previous experience always begin with training & learn until you start making profits on you demo trade account before investing your trade capital.

4. Nothing wrong with breaking even.

Not all your trade positions are going to be winners. It is better to break even than to lose. If you know that a transaction has turned against you do not start praying for a miracle hoping for the price trend to reverse instead cut your loss and move on. There are numerous and endless profitable trading opportunities.

5. Speculation is your worst enemy.

Don't speculate on where trading price maybe heading. Always use your charts and your plan & study the trend before opening and executing a trade. The trend is your best friend, so make good use of it by following the price charts.

6. Don't allow your winning positions to turn against you.

If you have an open winning transaction at hand do not allow it to turn against you. It is better to set a stop 5 pips above the entry opening point and break-even/or win little than to let it turn in to a loss.

For how to use these tips look at the Index plan course: the section about this is illustrated and shown below.

Transforming Your Psychology and Mindset When Trading - Index Psychology and Risk Management PDF

Psychology Section on Indices Trade Plan

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