Psychology to sustain yourself in Markets

There are many attributes one must have to succeed in markets, be it in investing or trading. But the most important attribute is the mindset one needs to have to sustain in markets.

But why is mindset the most important attribute?

The answer is simple- because it involves money. Money can ruin lives in trading/investing. You can tend to lose money really quick if you are not careful. There are only a handful of people across the world who have made money by directly investing or trading in stocks. Another handful have managed to just stay afloat. The remaining 90% have only lost their hard-earned money. You do not want to fall in the last category and if you want to move up to the first category, you need to be disciplined and work on your mindset. Always listen to the charts and not to anyone else in the world and not even to your heart or mind.

Remember, in markets something which goes up, will continue to go up and something which goes down will continue to go down. And, markets will not listen to anyone else. It is a place controlled by big players who are the richest of richest and will take your money if you are not careful.

But how does one work on their mindset?

Firstly, you need to define your rules for entries and exits.

Next, you need to have a rule as to how you will deploy your money and what will be your risk management strategy when you continuously lose money and your capital is depleting slowly.

After you have defined the above two, you need to prepare your mind to:

  1. Accept losses in markets because everyone will have losses and it is your behaviour during this period that will define your success in markets.
  2. Do not be Greedy – No one can consistently exit right at the top and no one can enter right at the bottom.
  3. Stick to your plan which was devised before you entered the stock- if you do not have a plan when to exit, do not even think of buying a stock.

If you can’t do these 3 continuously, then you might end up losing your money quickly.

Recommended Books for Psychology

I always recommend every investor/trader to read Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas. This book has personally helped me refine my approach and mindset towards markets.

Another good book that will help you understand the importance of being disciplined in the markets is: Market Wizards: Interviews with Top Traders written by Jack D. Schwager.

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