In today’s brief article, we will delve into the psychology of trading, specifically examining which emotions influence traders during trading. If you become aware of what you are experiencing at the moment and at which stage of the cycle you are, you will better understand how your emotions affect your trading decisions.
❗️OPTIMISM. It all starts with a positive outlook on the market situation, leading traders to open trades. Traders are anticipating future success.
❗️EXCITEMENT. The market begins to move in the predicted direction. Traders anticipate events and hope for guaranteed success.
❗️EUPHORIA. The point of maximum financial risk. Investments turn into quick and easy profits. Traders completely ignore the risk.
❗️TREPIDATION. The market continues to move in the direction favorable to traders; this is a moment of joyful anticipation. At this stage, traders are fully confident in their trading system.
❗️APPREHENSION. Oh no, the market is reversing! The first signs of movement against traders appear. However, they fail to notice this and believe that the market will recover and the trend will continue.
❗️DENIAL. The expected market recovery did not occur. Traders refuse to accept what is happening and remain in their position.
❗️FEAR. Reality dictates its rules, and traders begin to realize that they are not as smart as they thought before. Instead of confidence in success, thoughts become confused.
❗️DESOLATION. At this moment, all profit is lost. Traders had a chance to lock in profits, but they missed it. Not knowing what to do next, they try to do everything to at least break even.
❗️PANIC. The most emotional period. At this stage, traders feel their ignorance and helplessness and are entirely at the mercy of the market. Reason is paralyzed, leading to sometimes senseless actions in the market.
❗️CAPITULATION. Traders reach the limit of patience and close the position to avoid further losses.
❗️DESPIRATION. After exiting the market, traders no longer have the slightest desire to make trades.
❗️DEPRESSION. Traders begin to blame themselves for their foolishness, for not closing the deal on time. Some choose the right path and start analyzing what went wrong. Real traders are born at this stage, learning from past mistakes and drawing conclusions.
❗️HOPE. “I can still do it!” Eventually, traders return to the realization that there are indeed cycles in the market. They begin to analyze new opportunities.
❗️FAITH. At this stage, traders restore faith in their future in the market and resume trading.
And at what stage are you?