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Trading Psychology Lesson – Impulse Trading

On this page we’re going to research the concept of negative and positive trades.
We will note that good deals are a result of making ‘good trading decisions’ but alas may still have ‘bad outcomes’.
Alternatively, bad trades are a result of making ‘bad decisions’ and on occasion could possibly bring about ‘good outcomes’. iota coin
The trader’s best tool in breaking the mold of most novices who lose wads of money in the market is to focus only on making good trades, and worrying less about good or bad outcomes. 
In our Workshops we make an effort to deliver students strategies which help identify the best trades to suit particular and personal trading specifications. We now have a quantity of trading strategies that can be used to reap rewards from the stock market, with each strategy by using a particular structure or ‘setup’ to formulate a smart trade. Most traders however don’t have such a structure, and as a result, too often give in to the dreaded ‘impulse trade’.

This is a generally overlooked concept in committing literature and refers to an unstructured, non-method, or non-setup trade.

Succumbing to Spontaneity

We’ve all recently been there!

You look at a chart, suddenly view the price move in one direction or the other, or the charts might form a short-term style, and we jump in before considering risk/return, other open positions, or a number of the other key factors we need to think about before entering a trade.

Different times, it can feel like we place the trade on programmed initial. You could even find yourself staring at a recently opened position thinking “Did I just place that? ”

All of these conditions can be summed up in one form – the impulse control.

Impulse trades are bad because they are accomplished without correct analysis or method. Successful investors have a particular trading method or style which serves them well, and the behavioral instinct trade is one which is done outside of this usual method. This is a bad trading decision which causes an undesirable trade.

But why would a trader suddenly and spontaneously break their time-tested trading formula with an impulse trade? Surely this doesn’t happen too often? Well, sadly this occurs on a regular basis – even though these transactions fly in the face of reason and learned trading behaviors.

Even the most experienced traders have was a victim of the instinct trade, so if you might have done it yourself no longer feel too bad!

Just how it Happens

If it makes no sense, why do traders succumb to the impulse trade? Since is usual with most bad investing decisions, discover quite somewhat of organic psychology behind it.

In a nutshell, traders often succumb to the behavioral instinct trade when they’ve recently been keeping bad trades for very long, hoping against all reason that things will ‘come good’. The situation is exacerbated when a trader knowingly – indeed, willingly – places an impulse trade, and then has to deal with additional baggage when it incurs a loss.

One particular of the first emotional factors at play in the impulse trade is, unsurprisingly, risk.

Contrary to popular belief, risk is definitely not a bad thing. Risk is actually an inevitable part of playing the markets: there is always risk involved in deals – your best organized transactions. Nevertheless , in smart trading, a structure is in place in entrance of you transaction to accommodate risk. That is certainly, associated risk is factored into the setup so the risk of loss is accepted as a portion of expected outcomes. If a damage occurs in these situations, it is not because of a bad/impulse control, nor a trading mindset problem – but this is the result of adverse market conditions for the trading system.

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