Sunday, August 31, 2008

Trading Emotions

Fear
No Risk No Return. This phrase is well known and it is not required for most of us. But for those who find taking the plunge difficult, it applies strongly. In addition to this, you will not learn unless you dive.
Despair
Despair generally arises when you are not applying your rules and are taking the wrong bets. The thinking process is retarded when despair arises. Take a break, take a deep look and you will generally find that you are doing something very wrong. That is, if you are following generally known good principles of trading.You will notice that in your bad times, if you have very little capital left, you will start compromising on the very principles that will give you any hope of recovering from your losses.
Doubt
When in doubt, don’t. Follow this simple rule and you will be better off in trading. There are many factors that influence the markets. At any point in time, even technical indicators, support levels, patterns may conflict each other. For example, there is a buy signal on the basis of 15 min charts but weakness in the 1 hour chart. If you cannot verify and come to a clear conclusion, just leave that opportunity alone. There will be many more coming your way.

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