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A Guide On Trader Psychology

The document provides guidance on maintaining emotional control and discipline when trading. It emphasizes avoiding emotional decision-making by relying on indicators for trades and not monitoring profits and losses. It outlines common mistakes like chasing trades, overtrading, and bag holding. The document advises setting stop losses, position sizes based on risk tolerance, and selling at resistance levels to manage risk.

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Syed Aamir Ahmed
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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53 views4 pages

A Guide On Trader Psychology

The document provides guidance on maintaining emotional control and discipline when trading. It emphasizes avoiding emotional decision-making by relying on indicators for trades and not monitoring profits and losses. It outlines common mistakes like chasing trades, overtrading, and bag holding. The document advises setting stop losses, position sizes based on risk tolerance, and selling at resistance levels to manage risk.

Uploaded by

Syed Aamir Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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© 2023 YOUNG BULL INVESTORS INC.

Young Bull Investors


A Guide on Trader Psychology

PSYCHOLOGY AND EMOTIONAL CONTROL IN TRADING

Trading relies heavily on discipline and emotional control, which is one of its most
challenging aspects to conquer.

It's crucial to understand that mastering your emotions is entirely your own
responsibility; there's no magic indicator that can do it for you. What's important to
grasp is the need to remain cool and collected, whether you're experiencing wins or
losses.

Remember, you're up against emotionless computers and seasoned traders who


maintain their composure.

If your emotions take the reins, they'll steer you in the wrong direction. Trading has a
way of exposing your weaknesses, but with patience and effective risk management,
you can steer clear of losses and mistakes.

HOW TO AVOID EMOTIONAL TRADING

• Approach each trade as though its your first trade of the day; with a clear,
emotionless mindset, regardless of prior gains or losses.

• Rely on the provided indicators and alerts in Discord for trading decisions; DO
NOT make assumptions about stock movement.
© 2023 YOUNG BULL INVESTORS INC.

• Avoid monitoring your Profit and Loss (P&L), especially during active trades, as it
can lead to emotional decision-making instead of chart analysis.

• Always set a realistic daily profit target.

• If a trade is going against you, consider a small loss; you can re-enter when the
indicators turn positive.

• Determine your risk levels before entering a trade to facilitate a smoother exit if
the trade doesn't go as planned, as you've already accepted potential losses.

• Set stop losses to ensure a guaranteed exit.

COMMON MISTAKES

• FOMO: FOMO results in chasing. This means taking riskier trades instead of
waiting for a price drop after missing the initial entry.

• Overtrading/Revenge Trading: This happens when you take too many trades that
may not be good, instead of being patient and waiting for the right opportunity.

• Bag Holding: It's when you stay in a losing trade, hoping it will bounce back.
Remember, hoping is not a strategy. And it's a big NO to hold these stocks
overnight, especially at a loss, hoping they'll recover the next day.

RISK MANAGEMENT

In trading, it's crucial to follow a systematic approach. You don't create your own rules;
instead, you adhere to what the indicators tell you. If you get stopped out when the
indicators turn bearish, and you miss a potential breakout, don’t sweat it. In most cases,
if such a situation occurs, it leads to a significant loss due to a subsequent sell-off.

Consistency is key. By sticking to the same rules, you ensure low-risk trades with the
potential for bigger profits. Otherwise, trying to recover from substantial losses can
become a challenging uphill battle. The indicator set, along with support/resistance
© 2023 YOUNG BULL INVESTORS INC.

levels and key numbers, is designed to provide you with low-risk trading opportunities
that offer high rewards when they prove successful.

3 TIPS TO LOWER YOUR RISK

SETTING A STOP LOSS:

When practicing risk management, avoid setting stop losses at narrow intervals such as 10 cents
or 5 cents. Instead, your stop levels should be based on support levels or below moving
averages, like the 8 EMA, 21 EMA, or 34 EMA. Place your stops below the most recent support
level or beneath significant support or macro-level (bigger picture) support, such as positioning
them below the pre-market (PM) high, for instance.

POSITION SIZING
Select a lot (share) size that aligns with your comfort level. For instance, if you are new to trading,
you might start with 50 to 100 shares and gradually raise this number as you grow more
consistent and gain confidence in your trading abilities.

SELL TARGETS
When seeking potential selling points, always consider selling at resistance levels mentioned in
the alerts chat or at observable resistance levels, including macro resistance levels such as pre-
market (PM) high, high of the day, previous day’s high, etc. However, be realistic with your sell
targets. Additionally, consistently take what the trade offers; if there are multiple sell signals
below your intended sell target, ensure you react accordingly and exit your position.
© 2023 YOUNG BULL INVESTORS INC.

RISK MANAGEMENT

Before placing your first trade, ensure the following checklist is met:

I have configured Thinkorswim or Trading View with Real-Time Data.

I have configured Thinkorswim or Trading View with the Young Bull


Investors Style & Studies.

I understand the concepts of targets, entries, and exits.

I am using a share size that aligns with my comfort level.

I understand how to read and interpret the alerts provided in the


Discord.

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