What they don't tell you about trading - Part I

in Project HOPE5 months ago

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Erarium is a project whose main mission is to provide education in the different branches of knowledge, so we will be publishing content of high interest and learning in various topics, mainly taking into account the "Financial Education", for this we want to start educating all users in what is "Trading", a topic that many have asked and want to know, so we will be publishing regularly on this so that everyone can become familiar with the world of stocks and stock markets as well as that of Cryptocurrencies.

Without further ado, let us begin...

Introduction

As you well know, to be successful in any activity you need 3 things:

  • To be physically well.
  • Be well psychologically.
  • Mastering the technical issues of the activity itself.

Although it may seem trivial, it is important to be well rested, have a good diet and maintain regular physical exercise to be successful in trading. It is about having a balance in the important things. In this series of trading publications, we will focus on the last two points: The psychological and technical aspects of trading. If you are new to trading, you may have a tendency to underestimate the psychological part, so please pay close attention to that unit as it is key to understanding why some traders succeed and others don't.

Psychology in trading: Thinking long-term

In today's world, where everything has to happen IMMEDIATELY, where we want to lose weight in a week, where we want to have the body we dream of without effort and where we believe in "magic" solutions to solve our problems, it is not strange that people approach trading with the intention of becoming millionaires in a month and being able to quit that job they do not enjoy, even though it sounds too good to be true, unfortunately, it is not like that. In fact, that's how I came into this world.

Little by little I realized that I had been a victim of a lot of misleading advertising that revolves around this industry. If you have such an approach to trading, the faster you become aware of reality, the more money you will avoid losing. Trading should be seen as a long term business, where we grow as traders, as people and in volume of money gradually, having a long term approach will prevent you from taking unnecessary risks in the stages, which will avoid the very possible loss of money.

Self-Aware Traders

Have you ever looked at your watch and after 5 seconds you can't remember what time it is and you need to look again to remember the time? Another example Do you open a page on the Internet in a tab of your browser and then realize that you already had it open in another tab? This happens to us because we are lost in our own subconscious and do not realize it. These behaviors can ruin our trading and to avoid this, we have to create "self-awareness" which is basically being aware of what we are doing and thinking in the present moment.

A trader who is not self-aware does not really understand what he is doing in his daily trading, he opens his trading platform and jumps from time frame to time frame, or from market to market and "hunts" for opportunities to enter any asset without clear criteria. At the end of the day, we ask ourselves what we did wrong, because we didn't make any money and we simply wait for the next day and see how we can look for the fall in the market to make money. We tend to think that the lack of success is due to our strategy and not our overall approach to trading and assume that it is only a matter of time until we somehow find what works.

F.O.M.O

Do you know the acronym F.O.M.O. (Fear Of Missing Out)? It's basically the fear of being excluded from something. Because of F.O.M.O. we are so aware of social networks, our mail, our phone, etc. This fear also affects trading, since nobody wants to miss the big market movements and we want to catch them just when they start until they end. This can cause us to enter the market very late, with the simple intention of calming our fear of missing a supposed big movement.

To avoid this situation, we must have a very clear criteria to enter, our "TRADING PLAN" has to detail what conditions have to be met to place an entry, we have to cultivate our patience and discipline to wait for these conditions to occur and we can place an operation. Although it may not be to everyone's liking, trading is a game of much patience, which means that we must know how to wait for the appropriate conditions to be met, and it depends on this whether or not we succeed in our operations.

Think before you act

To conclude this first part, it is important that you bear in mind the following: Please think before you place a trade, basically this has to do with emotional intelligence and the ability you must have to manage your emotions to trade.

We will pretend to place a trade in the market:

Did you make sure that the price action meets all the criteria that it has to meet?

Is it a really profitable trade or are you acting impulsively because you are out of a certain trend, that is, F.O.M.O.?

Is the trade good or do you find yourself bored watching the price for hours without taking any action?

Do you want to enter the market, seeking revenge for losing in previous trades?

If this was the only trade you could make in a day, would you choose it as the one?

If you were risking most of your capital, would you take it?

In this way, we could pose many more probable scenarios of why we enter the market, the idea of this is to become aware of what we are about to do and make a small assessment of our mental and emotional state.

Probably, many of these situations described here, have happened to many, if so, then I hope you really take the recommendations made in this first part of the posts related to the topic of trading. It is very likely that people just started in this world, do not give importance to all these recommendations, but making a quick analysis of the chart, the price and a couple of clicks is enough to make money in the market. It is important to internalize all this, since many people think that it is only a matter of knowing in which direction the price is going to go and all this of Psychology is a waste of time, but take a few seconds to think about all this, I assure you that you will be able to save yourself time, money and headaches when entering this world of speculation.


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