What are the various emotions in psychological trading?
- Hopefulness
It’s a positive attitude or emotion which makes a trader hold onto a losing trade due to irrational hope of prices moving back in the expected direction. Even when a trader’s common sense says it’s not possible.
- Overconfidence
When initial ideas and strategies about the market work for a while, traders may start thinking about success and neglect risk management. Overconfidence takes an upper hand in the trading process; sometimes as a result they could take high risks and do overtrade.
- False belief
This is a stage where a trader is surprised with his/her success and grows egoistic, thinking about himself/herself being so perfect and smart due to initial success. A Stage that seduces us to develop false beliefs and expectations.
- Euphoria
The strongest positive emotion a trader feels after seeing profitable short-term results. It makes us think that making money in the market is so easy and we forget the risk factor altogether.
- Nervousness
At this stage, traders start becoming a little nervous when some of their trades move against their expectations and beliefs. A few unrealized but consistent losses, which we never expected, make us a bit worried.
- Refutation
After a period of a losing streak, many traders start denying first and then acknowledging the fact, their actions might be wrong. False beliefs and expectations get challenged in this stage.
- Lack of confidence
Negative thinking and negative thoughts take over a trader’s mind completely. The trader might start thinking “nothing will work for me”. Due to a lack of confidence in their abilities, it’s pretty easy to fall prey to tip providers and advisories.
- Distraction
This is the stage when a trader is completely blank about what to do and he/she starts taking positions unconsciously just to reach the breakeven point. A trader’s mind is completely distracted without proper objectives or clarity.
- Hopelessness
At this stage, many traders will exit the market and never want to trade again, and they feel hopeless about their decision-making abilities and get disinterested in taking any further trades.