The True Nature About Trading The Financial Markets

trading psychology Aug 03, 2020

Many new traders think that trading the financial markets profitably means having the ability to make trading decisions with precision and certainty. However, I want to emphasize that you can never be too sure about your analysis and the trading outcome, as your trading decision might not always turn out well at all.

Trading is not like a surgery where you know that if you can actually cut this muscle well, or if you can repair that ligament well, and if you can stitch up very nicely, definitely this guy can recover from the surgery with high certainty. It’s not like that.

Trading is not like that. Trading is always about playing with probability. Trading the financial markets is not entirely a scientific or mathematical endeavor because the thing about human psychology and the way that people behave cannot entirely be attributed to a scientific study or proof.

If you’re looking at just one person, yes, it can potentially be scientific. But if you’re looking at a large population of people getting in and out of the financial markets all the time, there are really a lot of reasons that can cause people to buy or sell.

It’s not just fundamental. It’s not just technical. Sometimes it’s really just greed, fear, and human emotions at work. So the bottom line is that trading the financial markets is never scientific.

So this means that the only best thing you can do is to observe how the market behaves. Come up with a somewhat rational and logical deduction to what is happening in the market or the price of any stock right now.

What you can do next is to take a small bet on your hypothesis. Put your order in. Let the market tells you whether you are right or whether you are wrong. If you are wrong, just be humble, exit your trade with a small loss. After that, continue to look for the next potential trading idea and next trade again.

But if your original trade turns out to be profitable, focus on where is a good target to take your profit. If you are experienced enough, you can also maximize the return that you can generate from this trade by pyramiding or by using a trailing stop exit.

Be happy and grateful that the market is willing to give you those profits. And that’s it. That’s really just how trading the financial markets is like. There’s nothing too scientific or nothing that you can be too sure about your trading decisions and outcome at all.

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