As a trader, it is essential not to let your heart rule your head and emotion sneak into your investment decisions. While we know this in theory, putting it into practice can be very different. So, is investment all about buying and selling empty boxes?
Dismissing the concept of favoured stocks
When we talk about favoured stocks, does this bring into play stocks and sectors in which we have a genuine interest and deep-seated knowledge? We all have stocks that we repeatedly trade, trying to predict future movements from historical patterns? So, what is the best way to remove human emotion and, at the same time, dismiss the concept of favoured stocks?
It’s all about buying and selling empty boxes
If we mention Apple, day traders will have their views. If we mention Microsoft, there will be a different opinion, and so on. For example, due to historical movements, it may be easy to assume that after a significant fall in Apple shares, they will bounce back. But what is this based upon, reality or emotion?
Now we will look at this differently. While monitoring and researching a particular stock, assume it is an empty box once you buy in. You have bought an empty box for £5000, and you are looking to sell it for £6000. Removing the human emotion, the connection with the company allows you to look at things from a different perspective.
Is guilt as damaging an emotion as fear and greed?
When discussing stock market performance, share price movements and trading opportunities, many people point to the emotions of fear and greed as the main drivers. The fear of missing out and greed as you look to squeeze the last penny out of a short-term trade. However, is guilt an emotion which is just as strong for investors and traders?
Guilt is defined as:-
“Self-conscious emotion that involves negative evaluations of the self, feelings of distress, and feelings of failure”
That moment you begin to doubt yourself, re-evaluate your decisions time and again and come to different conclusions is challenging. However, the best traders can put their mistakes behind them, use stop-loss limits religiously, and then move on to the next opportunity. Akin to the concept of buying and selling empty boxes, there is no emotional baggage.
Confidence is the key to day trading
While everyone will feel negative thoughts and even question their judgement at some point, this can be life-changing for a trader. The best sportspeople, business people and investors all have an air of confidence but also an understanding that they will not always get it right. There is a big difference between confidence and arrogance; arrogance is a trait which very often sets you up for a fall. Confidence means that not only do you have confidence in your decision-making skills, but you also know when you are wrong.
Finding your niche
To be a successful investor, you need to have a genuine interest in trading, an eye for a new position and the ability to think on your feet. Following blindly can sometimes be akin to lemmings walking off a cliff together, a cult-like dedication to your heroes. There's nothing wrong with reading the views and reviews of successful traders, business leaders and stock market observers. However, you need to find your niche, trading personality, and a strategy that suits you.
Run your winners, cut your losers
Successful day traders learn to run their winners and cut their losers to maximise their gains. A central element of this strategy is not only lower latency high-tech trading platforms but also competitive charging structures. We continually compare and contrast our charging structure, remaining competitive while also improving services. A challenging balancing act but one that we relish!