Trader Psychology

Psychology of human behavior is one of key factors to understanding what happens on financial markets. All usual everyday feelings and desires find their reflection in harsh battles on the market. Well-known human feelings of fear, greediness, and hope may have critical influence on the behavior of every trader. Both weak and self-assured, both greedy and slow-going - all can suffer from their characteristic traits and lose on market because of them.

There is one way out: when you estimate correctly your abilities and preferences, strong and weak points, this may save you from bankruptcy on the market. Add to this your ability to assess the psychological state and foresee the behavior of market "crowd" adequately, and you get unique tool for successful trading!

Greediness

Greediness is a powerful force which makes people work on speculative markets.

If you are not greedy enough, you will make few contracts and lose many moments for catching a good snatch on the market. You are this kind of person? You should better try yourself on other field. Change this business for something more calm and quiet.

If your greediness has no limits, you will try to make as many contracts as possible. Surely this may result in frequent risks, and (more often) frequent losses. Go to casino: it suits you better and will be cheaper for you.

Features of greediness can be found even in motivation.

Motivation may be:

rational: it is characteristic to everyday work of a professional trader or to newbie traders (before the first entering into the market);
non-rational: may be seen in uncontrolled "trading excitement" particular for the vast majority of traders. Some traders have the nerve to calm their emotions; others cannot do it and lose.

You can find out whether you are strongly addicted to your emotions when trading or not with the help of this hint. When traders ask something like: "What do you think of it?" If they always speak about positions they have opened. If they do not have made any fixed plan before making real contracts, you can be sure these people are motivated with emotions; rational approach bores them.

Best treatment for it - plan all contracts before they are made. Plan your financial activity.

Hopes and Expectations

Another highly motivating factor in making a contract is the hope of each trader to get profit.

This is logical: every work should result in getting money. But when hopes prevail upon real calculations, you risk making a huge and very real mountain of losses out of a small mole hole of your dreams.

Hope has sufficient impact upon trading behavior mostly in two cases:

when traders enter the market. Only hope for getting revenue may force a person to make something on financial market;
when traders suffer losses. At these moments one may hope that everything still can change for better.

Hope passes three stages:

when losses are small, hope is strong and quite rational (if you continue working as planned);
when losses continue growing, hope reaches its climax (if you manage to separate your hopes from real facts, you can save the situation by closing unprofitable position);
when losses become critical, hope is changed with despair (very painful for newbie traders, feeling as if the whole world goes against you).

Once you have survived all three stages, you can call yourself a real trader. In future memories of despair will trigger the feelings of fear when trading.

Fear

Fear comes when you suffer losses. Fear can paralyze one: you are stunned and cannot protect yourself from losing everything. Others get too agitated under fear and start making innumerous contracts. Surely, they lose even more than expected.

During these critical moments one should never get stunned - do something before you waste the best of your dreams with changing quotes. But, be very careful about your actions. Do as planned and plan properly!

Now you know that greediness, hope and fear mean much for trader psychology. Work with your emotions, boost your psychological stability - this is the only road to successful work on financial markets.

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