I was reading this book called trading for a living by Alexander Elder. It’s about the market psychology, on how human behavior can influence and dictate price movements and overall performance of the stock market.
I really do believe that market is not just a battle of the minds but more of a psychological war. Our psychology affects how we behave in the market in executing our trades and choosing our stocks to invest.
There are 2 emotions in the stock market: fear and greed. When you seek advices to people with experience in this field, they always keep on telling you that never allow your emotions go with your trading. Sounds easy to do, right? But believe me; controlling emotion over the market is far more difficult than reading charts and indicators.
You know it’s difficult because real money, your MONEY, is involved and any wrong trade may result to loss and further losses. It’s hard not to be emotional on times when you see your portfolio is all red and your paper profit is melting.
So, why we need to control emotions in the market? Well, it’s because trading ruled by emotions makes us do stupid trades. It makes us upset or excited on sudden changes in prices that deviates us from focusing on our trading plan. Emotional trading is for amateurs! The problem with most amateur traders is that when they enter the market, they only have one goal in mind and that is to earn big. It is possible that you can yield more than 10% of your initial investment in just a week but c’mon, the stock market is not your Santa Claus and everyday is not Christmas.
Every trader first goal must be long term survival. It’s not all about making money in the market. It is about trading well. If you trade well, then money follows. The first 2 years in the market is a battle for survival for amateurs. Afterwards, you can strive for a steady growth of capital. Making high profits should be your 3rd and last goal in trading.
I am not yet finished reading this book. It’s a good book and I recommend it to people who want to take stock trading seriously. I will post more about this book.
