Trading on the stock market can be overwhelming. There are so many available choices and factors to consider before you buy stocks that excitement turns into confusion, frustration, panic, anger, guilt, and fear, becoming apathy where nothing gets done. It’s not surprising that new traders give up before they’ve even had a chance to learn the ropes.
What determines whether you’re going to be an active trader or not? More importantly, what keeps you in the game when things get tough? Maybe you want to make some extra cash on the side, or you would like to quit your day job; whatever your motivation, it will never materialize if you don’t have the right mindset.
Every successful stock trader has unique strengths and weaknesses, but they all share some common qualities to keep making that profit. What are those? Find out below.
Endeavor to be objective
Whether you’re trading stocks, currencies or commodities, your decisions should be based on facts, not fiction. If you can’t suppress your biases, this will lead to suboptimal results, yet there’s no way around it.
You need an unbiased approach for discretionary decision-making to work, so try asking yourself these key questions:
- How much am I willing to lose?
- Am I overconfident about my strategy?
- What happens if the market goes in the opposite direction?
- Is there a more straightforward way of doing this?
- Is my approach scalable?
- What’s keeping me from applying for that job at Goldman Sachs?
Make sure you know the answers to these questions and others like them. If you can’t, get back to work!
Stay focused
It doesn’t matter if you’re making money or losing it – always pay attention! The more mental firepower you put into your work, the better results you’ll generate. It might be tempting to check up on your investments every few minutes but resist the urge by blocking time-wasting sites and apps on your computer or phone.
It would help if you also tried holding regular office hours so that your colleagues know when to expect you. Failure to stay on top of things will lead to poor results, leading to more stress, leading back to square one. Nobody needs that kind of lifestyle!
Do your research
Your broker is always happy to help, but this doesn’t mean they’re the experts. Learn how the markets work by reading up on economic events, corporate announcements and general financial news out there. It will give you a good idea of what makes the stock market tick while simultaneously building your investment thesis. You must focus on getting better instead of just making more money.
Adapt to the situation at hand
There are times when betting all your chips on one investment makes sense, while you should take things slowly at other times. It’s essential to go with the flow and bring out the big guns only when they’re needed – not before.
Sometimes, your gut might make you do silly things or make bad decisions, but this doesn’t mean you should ignore it completely. The key is finding a balance between keeping up appearances and cutting your losses short; don’t hunker down for no reason, though. Pump the brakes whenever you see that too much risk is involved!
Stay on top of things
We already mentioned holding regular office hours, but what about checking up on your investments every 5 minutes? It will only lead to stress, leading to sub-optimal results, so stay away from the fridge until quitting.
In short, you have to strike a balance between being active and reactive. Just because you’re not overwhelmed at work doesn’t mean you should be glued to your screen either.
Check the numbers!
Just because someone has a strong track record of past success doesn’t mean they will keep up those results. You need to check the numbers before making an investment decision; otherwise, other people’s triumphs only benefit them while leaving you in the lurch after doling out poor advice.
