"Having several successes in a row generally generates an excess of confidence, which we have to learn to control. This happens to many of us in trading, you always have to think that the market is surpassing itself and studying your weak points" | Anonymous
Knowing how to manage emotions when you are trading could turn out to be the difference between success and failure. Fear, greed, and an inability to accept losses can all derail your efforts -- your trading psychology will greatly improve once you learn how to control your fears. When the market psychology shifts toward more negative emotions like anxiety or panic, the sense of overconfidence will rapidly put you into deeper losses.
The irony is that overconfidence leads to frequent trading, and frequent trading leads to poor performance. OK, so being too confident while trading is not going to cost you your limbs or cause you to be booed off stage, but being arrogant may lead to making irrational decisions and taking risks in your markets positions. Just because you had success with a trading strategy in the past does not mean that you should ignore caution in the future.
"Overconfidence is as evil as undue anxiety" | Thomas Chandler Haliburton
Of course, sometimes it is necessary to switch up your trading strategies, but only when the market conditions change -- not simply because some trading has not worked out. Just because you are in a hot streak, whether the product of a well-executed trading strategy vs. good market conditions, or pure luck, does not mean that you can stop being cautious. Do not look to the markets to make you feel better; if you are not feeling up to trading, then perhaps the easiest fix is simply to walk away.
"For a winner, complacency and overconfidence can be destructive. For losers, despair and despondency are just as damaging" | Bill Walsh
There are always more deals coming up, and you should only ever use capital that you can easily afford to lose. If you are living your life with a fear of missing out, then you will buy when excited/greedy, sell when you are worried or scared, and the cycle will continue as you grow impatient. Once you only begin looking at trades that may potentially become massive winners over moves you made earlier, then you are in danger of letting greed take hold of your strategy, likely leading to massive losses -- wiping out gains you carefully built up over an extended period. Selling low, just as buying high, may also be driven by the psychology of crowds, but also fear and anxiety surrounding financial losses.
Fear and greed produce overreactions, meaning that astute traders may purchase assets which are selling high, while selling assets which are selling low. A volatile, high-risk digital asset like cryptocurrencies may scare traders, leading them to shift trading into lower-risk investments instead of buying stocks when the markets are cheap. Financial trading can be frightening, as you are investing your own money, with the risk that you could lose it.
"Between trust and overconfidence there is a very fine line, which we must see or feel. Intuition or the sixth sense is an internal voice that can guide us, especially when it comes to trusting other people" | Anonymous
You may be a skilled trader who has a lot of knowledge and trade skills to get a profitable stock market position. While there is no way that every trade will turn into a profit, you can follow stock market psychology and successful traders habits in order to improve your chances for achieving a higher level of stock market success. It is one thing to believe that your trades could potentially turn into profits, but it is another thing entirely to believe that you know everything there is to know about the markets, and there is no chance that you will ever lose, since everything you do is to make money.
"Never be afraid to fail. Failure is just a springboard to improve. Never be overconfident because that will block your improvement" | Tatchakorn Yeerum
