In this market, the factors that determine the success or failure of the transaction can be compared to an inverted pyramid, the most cutting-edge is technology, where technology is a general concept, not specifically technical analysis, even if it is traded with fundamentals or algorithms, it is also a technical means. Technology is used to deal with market changes, every serious trader must have excellent technology, the proverb so-called "no diamond, no porcelain work" is very vivid to say that excellent technology for the success or failure of the key role of trading. The requirement for technology lies in specialization, not in many and general. A trader should be proficient in one technique, not one who knows everything but is sparse. Proven technology is the foundation of successful trading, but a trader can't just dive into it and focus on technology. Trading psychology is just as important as trading technology and is an indispensable key factor for trading success.
As George Raymond Richard Martin said, "The invisible enemy is always the most terrible", and many times we tend to focus too much on all the actions that arise in the context of the big picture, and ignore the existence of our own problems. A boat can't go up a stream without oars, and the same is true of this market, where we can't manipulate or control the market, and the market never changes for us. But if we want to make a big difference in this market, then we need to learn to change our position and learn to control ourselves so that our view of how the situation should develop is appropriate to the environment. In this way, we can look at information from an objective point of view, and we can organize and build our own mental constructs so that we can always act in our best interests. Therefore, we need to overcome the two most common psycho-emotional disorders:
1. Greed
In the stock market, overconfidence is a feeling of invincibility, and you think you can succeed in any trade and make a lot of money easily. You have no worries and a "what is this" mentality. You have blind beliefs and are blind to the risks. In this case, over-ambition is overconfidence in your ability and how you make money. And when ambition reaches a certain level and decision-making turns into compromise, it means that greed appears.
You start focusing more on wealth and your account balance rather than percentages or price movements. You don't want to miss a big opportunity and enter the market greedily in case the trend continues, but it is too late. When you see other traders making money, and you want to make money too, there is a sense of panic. You end up chasing the price and justifying the worse because the opportunity still "feels right". So you rush into a trade, but as the trade gets intense, your judgment becomes more ambiguous. Thinking about your imminent victory, indulging in your own ingenuity, you miss a clear closing point.
And then you end up making a decision that you know is wrong in the long run, but you can't control yourself. You are driven to find the best time to enter and exit the market, earn high returns, and profit from every trade. There's an irrepressible craving, never satisfied, a craving that requires money right now, and it's so intense that you turn a blind eye to the risks. But the market tends to punish you the most for trying to squeeze every penny out of every trade and maximize your returns.
2. Fear
Higher uncertainty is inevitable when you are unsure of how you are making money, what trades you should be doing, or whether your losses are due to mistakes or bad luck. This uncertainty will cause more and more nervousness, doubt and fear, and this will also lead you to decide the trading decision is not a predetermined trading strategy or plan, but the limit of psychological tolerance, many traders often close the position is not because of stop loss, but because of the fear of continued loss of funds or profits and losses caused by the psychological breakdown of the heart, at that moment, he feels that the loss will never expand or the profit will never decrease, you can be relieved.
Therefore, how to address certainty is the antidote to fear. I'm not saying that the ultimate goal is to always have certainty. It's simply not practical. Rather, I would say that certainty and fear cannot coexist, and uncertainty is a breeding ground for fear.
Here's a relatively good way to do this – try to take the worst-case scenario at any time. This is to use this to lower your estimate of how bad the thing you are worried about is. Then, when you feel your mind sink into thinking about the worst-case scenario, tell yourself why it won't be so bad. Think constructively about what you can do right now to achieve your goals.
In other words, if the worst does happen, you'll find a way to make sense of it and move forward. It won't be fun to go through this process, but it won't be that bad either. You can't possibly know what's going to happen in the future, whether it's positive or negative. However, no matter what happens, you will do everything you can to live better, just as you have done in the past.
It's also worth noting that disasters can bring innovation and adaptive change. For example, a trader is liquidated and has to temporarily do a new job. In that job, a new perspective on the value of emotional stability was born, and discipline was improved. When he started trading again, these improved skills became the catalyst for long-term success. No one could have predicted that their path to success would meander through disaster, but it might be just what they needed.
In the end, emotional control is not the best way out – resolving the problem is. In any game, we develop strategies to help ourselves achieve our goals. But when it comes to psychological games, traders set their goals too low. They believe that the best strategy is to control their emotions, but controlling emotions is not the way out, it is a long-term and difficult task.
If controlling your emotions is your only strategy, you'll have to fight a succession of emotional reactions all the time. Trading itself is tricky enough, not to mention putting more effort into controlling your emotions. This can be exhausting, and in the long run, you won't be able to reach your potential as a trader.
The ultimate goal you should strive to achieve is to solve the problem. Resolving the problem means that you have completely eradicated the behavioral defects that caused your trading failures. Naturally, those factors that would have triggered emotions such as anger, greed, fear, etc., will fail. You will no longer struggle to manage, control, or react around your emotions because they have been "dissolved". Of course, there are different phases to the problem-solving system, and each stage has different steps and strategies embedded in it.
1. Map your emotional patterns: You need to have a macro view of your mood swings so that you have a clear picture of everything you're going to face. You'll also need a detailed, microeconomic "map" of emotions that you can react to, so you can identify them in a timely and effective manner and quickly and minimize the damage.
2. Find out the root cause of the problem: In order to find out the real cause behind the problem, you need to dig out hidden flaws, biases, and illusions, including mistakes in learning, that can hinder your progress or cause you major ups and downs in the process.
3. Correct your problem: Here you need to deal with the problem head-on by continuously using the method of correction.
The result of this system is to completely resolve the behavioral deficiencies that cause your problems. The importance of resolving problems cannot be overstated. Imagine what it would be like without greed, fear, anger, confidence, or discipline issues. I mean there are no problems at all. It's a result that is worth the hard work for. If you use this system, you can achieve this result.