Whether you are just entering a trade industry or have been a professional trader for a long time, there will be moments when emotions can influence your decision-making when managing risk. Psychology management in trading is one of the factors that helps you make more rational choices. The lack of a trader’s ability to process emotions could potentially lead to big losses.
However, the emotions that arise when you are trading are natural. It’s important that you learn to understand your emotions to make it easier to deal with them. Some of the emotions you need to recognize are: fear of loss, greed, and the over-excitement of getting a profit. We’ll go into more detail below so you can better deal with these emotions!
Types of Trading Emotions
- Excess Pleasure
Feelings of excessive pleasure or being overly excited, either because they are just about to start trading activities or after getting a profit, are often felt by traders. Especially after gaining big profits, with small capital, and in a short time. When this happens, there is a tendency for someone to make rash decisions and ignore the prepared risk analysis and management. Do not let yourself make reckless decisions that result in losses. Instead, take the time to refocus and re-analyze all kinds of factors that can support the next move to be taken. Stick to the trading plan that has been made to avoid making rash decisions.
There are times when making decisions, we only look at the possible profit. Indeed, it is very normal to want to make a profit. However, if you only think about judgment and are too confident with the steps taken without considering many things, it is a sign of greed. Greed or excessive self-confidence can lead us to make inappropriate and hasty decisions, losing even more as a result. Always remember that a professional trader must be disciplined, sticking to a trading plan.
- Fear, Nervousness, or Pessimism
As a beginner, traders will usually experience fear, nervousness, or pessimism — fearful of losing money, nervous about using real money, and pessimistic that the speculation may be wrong. Of course, fear is natural and within normal limits will make you more careful in your decision-making. If this fear is excessive, however, it will actually limit your profits because you constantly avoid taking necessary risks. The fear felt by the trader persists even though they have good analytical preparation and risk management. So, what you can do to overcome this fear is to take a moment to calm your mind and remember that the preparations that have been done are complete.
You can also outsmart your fear by practicing often on a demo account using virtual assets to sharpen your sense of familiarity when making decisions. On TokenomyX, you can demo trade with unlimited virtual assets. You just need to register your data, pass a series of verifications, and try the feature right away!