Internet usage has reached an all-time high, with many of the global workforce spending significantly more time online. Some of those who have been impacted by wage reductions or job losses have looked to make additional income in the form of online trading. The number of online traders has reached unprecedented highs, so much so, that INFINOX (www.INFINOX.com) recorded a 28% surge in online trading volumes in 2020.
While some have reaped the rewards of online trading, successful trading requires a certain aptitude and skill to achieve long-term gains, including an understanding of the psychological elements involved and having the right mindset in every trade.
Financial markets do not have a sense of ethics, morals or emotion. They’re not out to take your money, they’re simply a market based on supply and demand. Traders looking for market longevity need to establish an unemotional connection to their trades.
According to author, Norman Welz, developing an effective trading mindset involves personality modification. From an early age, people are subjected to a certain mindset, influenced by their upbringing, those around them, society and their current circumstances. Once they begin the online trading journey, these influences have a profound effect on their trading decisions.
Emotions such as greed, anger, overconfidence, and fear may surface during times of market volatility, however, it’s important to be aware of these and manage them appropriately. Traders should begin by identifying their personality traits. Once they have acknowledged them, they need to determine how they can negatively influence their trades and tailor a trading plan that takes these into account.
As a blueprint to success, a trader’s plan must take into account additional factors that have the potential to influence their success such as their time, available funds, and their risk tolerance. Becoming aware of these factors will help traders mitigate any possible risk and ensure they are less inclined to act on irrational emotions, which could result in detrimental investment decisions.
Apart from this, there are several tips that can help traders to cultivate a positive trading mindset, including:
- Get an early start
Traders should make an effort to wake up earlier than usual and either take part in a form of exercise or meditation as this will assist them in approaching the daily trading tasks ahead in a clearer and more relaxed manner.
- Discipline and patience
Patience is not the ability to wait, but the ability to keep a good attitude while waiting. This is true for online trading, with traders needing to learn from their wins and losses, and knowing when to cash out on a profit or cut a loss, both of which can be the deciding factor between a good or bad day at the markets.
- Learning never gets old
No one person knows everything, and in financial markets particularly, education is important to unpack the potential of untapped markets and new strategies.
- Keep abreast of local and global news events
News events create market volatility, evidenced by the tail-spinning of the market during the recent COVID-19 pandemic.
- Count your losses
Traders should have a handle on their losses and develop effective risk management tools to mitigate any future risk.
- Record your activity
Traders should keep a journal recording their trades. In this way, they can spot common mistakes and refine their strategies.
- Do what successful traders do
Follow the strategies of successful traders and learn from their mistakes and wins. This can easily be achieved by downloading INFINOX’s IX Social trading app, where users can interact with other traders and share trading experiences.
By following these guidelines and being aware of the damaging effect that misguided emotions can have on trades, online traders will be better equipped for success and longevity in the field.