Under current economic conditions, it's vital to trade like a professional trader rather than a recreational gambler. The Dow was up 500 points last week, but what will happen this week? How will the latest news influence the masses? These days an intuitive feel for the markets is necessary to trade and profit. The extreme volatility in today's markets offer many opportunities, but it takes the proper mental edge to take advantage of them.
Manage Risk. When trading volatile markets, it's vital to prepare for the worst-case scenario. There is no sure thing, and traders who don't manage risk tend to end up losing so much that they blow out their accounts. Don't make the mistake of allowing over-confidence or impulsivity to get the better of you. If you bet too much on "a sure thing," you will end up losing when the markets go against you, which they eventually will during times like these. Remember, it's easier to lose money than to make it back. So rather than lose too much on a single trade, manage risk.
Manage Your Ego Everyone wants to feel like a winner. It's tempting to pat ourselves on the back for making a winning trade, but it's essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner. When you put too much of your ego on the line with your money, you may feel great when you win, but on the other hand, you may feel discouraged when you lose. When you allow your ego to enter your trading, you put subtle pressure on yourself to succeed. This added pressure could compel you to make dumb mistakes like holding on to losing trades to avoid hurting your ego. It's better in the end to take a professional approach to trading marked by objectivity and rationality. Sure, it necessary to have a passion for what you do, but it is not necessary to get a swelled head.
Manage Your Stress Trading during uncertain economic times can be stressful. Stress can wear you out. It takes psychological energy to manage stress. Rather than allow stress to sap up precious psychological energy, it is vital to identify your sources of stress and take active steps to manage it. This may mean exercising regularly, cutting down on coffee or tea, and getting plenty or rest and sleep. If you are feeling stressed out, it is better to take some time off and relax. Trying to fight stress can take energy that you can't spare.
Winning takes the right mental edge. By managing risk, your ego, and your stress, you will increase your odds of winning during chaotic times like these.
From MarketWise
Regards,
Elias
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