How should traders think?

When someone starts their trading journey, they need to start to think in probabilities, which is a challenge for some people as it is not something that we as humans do daily. This means that traders need to start to think differently when they trade. This brings us to the million-dollar question – how should traders think when they trade the financial markets?

Too much thought about your last trade

Too many people put too much emphasis on their last trade, and that is not a good thing to do as a trader. The reason for that is that a decision is based on an emotion which will affect the traders’ mindset. Should it be a winning trade, a tendency to easily enter the next trade will exist, as the trader feels good about having a winning trade. The inverse is true as well. If a trader has a losing trade, he or she will be reluctant to enter the next trade, because they had a losing trade. We are all human beings with feelings and they will never completely disappear – the key is to make sure that these feelings are managed properly to provide us with a positive outcome.

Have a trading plan

So how do we overcome this? A great starting point is to have a trading plan. This plan will state the markets to trade, conditions under which a trade should be entered, the amount of money to risk per trade to name but a few. The key is to stick to this plan, and by no means should you deviate from this at all. Consistently following your plan, will provide you with a set of results which can be measured. This, in turn, will show that one trade individually should not matter. It comes down to having your trade end in one of four ways: Small win, small loss, break even or big win!

If you’re looking to step into the world of online trading, we’d like to help. We offer both courses and mentoring opportunities to help you trade with skill and confidence. Come along to our free* Learn to Trade Live one-day course on Saturday 12th January in London, to really get your foot in the door!

*You will pay a £50 refundable deposit to secure your space for the course, which will be refunded the following working day after you attend.

Further Reading:

5 Deadly Sins of Trading

In all walks of life, there are certain pitfalls we should always try to avoid. With trading this is no different. A lot of people can talk a good game, say all the right buzz words or sentences, and sound like they know exactly what they are talking about, but that...