Learn what truly separates profitable traders apart from the rest

One thing that separates the winners from the other 90% of traders is that they focus most on trading psychology instead of strategy. Newer traders are most worried about finding the best strategy out there. They think that once they have that, it will automatically lead to riches.As soon as you realize that this is not the case, you can set yourself on the right path towards trading profits. There are hundreds of trading strategies out there and most of them actually work. What beginners do is they try one trading style, wipe out their accounts and quit or start looking for another method to repeat the process. Sooner or later this vicious circle will end in tears (by tears I mean a severe loss of self-esteem and a hole in your net worth).Professionals win not because of their secret strategy, but because of their mind game. They take a strategy that fits their account size and personality and stick with it, while putting enormous focus on the psychological part of it.

The main emotions that affect your trading

As you need to make a lot of quick decisions in trading, emotions will often inevitably get the best of you. Without knowing, this seemingly small aspect can turn you from otherwise profitable to a losing trader.

Greed

This emotion makes traders wanting to hold on to their positions for longer than they should. Once already in profit and way past their initial target, they are still wanting more. In most cases, this practice will not result higher profits and you’ll end up losing the profits you had on your screen.A good way to fight this emotion is to lock in some profits along the way. Close half of your position and let the other half run. This way you will have some profits locked in, while still having a change to make more money with the trade.

Fear

Opposite to greed, this emotion will make you worry about losing the profits you have already made and closing out the position too early, without your initial plan playing out in its entirety. This is something that most traders suffer from without realizing how bad it will affect their results. If you close your losing positions where you should, but cut your winners short, you will end up with an average gain per trade being much smaller than an average loss. In the long term it is highly likely that this nasty habit will drain your account size to zero.The best way to combat fear is to acknowledge that it exists and try to fight the urge to act on your emotions. Being aware of your emotions is half the battle. The second half is practicing to not give in to them. With enough practice, you will see come to realize that developing good trading habits will grow your account size significantly.

Analysis paralysis

This doesn’t affect your account balance as much as the before mentioned emotions, but it will keep you from making any money in the stock market. Analysis paralysis happens when traders get so caught up in analyzing a company that they are too afraid to pull the trigger. Information overload will suffocate your decision making and keep you from getting invaluable real life experiences from the market.One way to get over analysis paralysis is to accept that you can’t know everything about the company you are analyzing. Develop a check list for your trading strategy and once a company passes it, pull the trigger and execute your trade. A good practice would be to include at least 4-5 key criteria that the stock has to meet in order for you to take the trade. The checklist will help you become more disciplined while helping to fight the urge to over-analyze trading opportunities.

How to deal with the emotions

The easiest way to improve your game is to first be mindful of the emotions by learning to recognize them. Once you identify these feelings, it is easier to monitor them and keep them from affecting your decisions.Another good strategy for keeping your emotions under control is to write out a trading plan before making a trade. Make a note of the initial idea behind the trade, your profit target and stop loss. Once you have them written down and positions in play, you are less likely to stray from the initial plan. Also know that if you do keep changing your mind, it will hurt your trading account in the long run. It’s the same as eating a box of Ben & Jerry’s while you’re on a diet. You should feel bad about it afterwards as instead of moving closer towards your goal, you are actually moving further away from it.Next time you put on a trade, be sure to recognize your emotions and try not to be affected by them. You will do yourself and your trading account a favor and will immensely increase your chances of success in the exiting world of day trading.