Psychology of Stock Indices Market
The reason why 90% of stock indices traders lose can be summed up with 2 words:
Stock Indices Psychology
Many people fail on the stock indices psychology front and only a few take the time to transform their mindset. The reason why most people make losses is not that they cannot beat the stock indices market, but because they do not have the right mindset. Stock Indices Trading psychology is all about transforming your mindset.
In Stock Indices, you must first master your method and then put in many hours of learning how the stock indices market works.
The stock index trading market is too complex and there are many factors that have a huge impact on the daily fluctuation of stock index prices. Traders should understand how the online stock indices market works through studying stock indices trend characteristics and also how these fluctuations take place.
Psychology and Emotions
When it comes to the stock indices market, winning is a matter of the mind. Studying the psychology of the stock indices market takes into account what influences others - including the mass psychology of the people that trade stock index trading on a daily basis. Anything involving winning or losing large sums of money becomes emotionally charged. Winning depends on knowing your own mind and also understanding how mass psychology moves the stock index prices.
In most cases when traders invest in a stock indices instrument, 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 and they hold on to their losing transactions in the hope that it will bounce back. Unfortunately their losses become greater and they find it even more difficult to close their stock index trade orders.
Even when traders make money & let their emotions get in the way, they either become greedy or over-trade.
Stock Indices Trading psychology will form a good foundation for trading profitably - it's about learning how to keep emotions out of the picture, and not to letting these emotions control your stock indices 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 three most dangerous emotions that tend to cloud judgment & cost you profits. These three emotions include:
- Greed
- Fear
- Hope
Six Tips for Transforming Your Mindset
1. Define your goal.
There are many important Stock Indices Trading questions that you need to answer before jumping into the stock indices market. Creating and defining agoal will give you a start point to your success.
2. Keep it simple.
Some people use more than 5 indicators on one chart analyze and to inform them of their next move with no success or even breaking even. Thing is that more indicators do not equal more accuracy.
The Three most powerful tools to use are:
- Candlesticks (buyer & sellers behavior),
- Indices Price action (such as support & resistances), and
- Stock Indices Trendline (up, sideways or down).
3. Do not get emotional.
If you are attaching emotions to your stock indices trades because there is real cash involved you need to change your trading mindset & 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 Indices practice account before investing your capital.
4. Nothing wrong with breaking even.
Not all your trades are going to be winners. It is better to break even than to lose. If you know that a transaction has turned against you don't begin praying for a miracle hoping for the stock index price trend to reverse instead cut your loss and move on. There are endless profitable opportunities.
5. Speculation is your worst enemy.
Don't speculate on where a stock indices instrument maybe heading. Always use your stock index charts and your plan and study the stock indices trend before opening a transaction. The stock indices trend is your friend, so make good use of it by following the stock index price charts.
6. Don't allow your winning orders to turn against you.
If you have an open winning transaction at hand don't allow it to turn against you. It is better to place a stop 5 pips above the entry opening point & break even/or win little than to let it turn into a loss.
For how to utilize these tips look at the Stock Indices Trading plan guide: the section about this is shown below.
Psychology Section on Stock Indices Plan
