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A to Z Academy / 1. Things investors must know before trading

2.Determine your investment direction and mindset

December 29, 2020 03:56

As a trader, figuring out investment goal, like how and where to invest, and build the right trading mindset is a seemingly easy but difficult and lengthy process. This process will usually differ person to person and not be the same. Some may study trading strategies first, while others may begin going through many practical transactions. There may be experienced traders who have not understood it after a long time, and there may be newcomers who gain a sudden insight after trading for a short time.

This article will reveal the simplest and most important points that investors need to know.

Make good investment rules

Successful traders always have their own investment rules, knowing when to enter or exit the market, when to increase or decrease their positions and even conduct stop loss just as if it was a reflex action.

But these behaviors are not just based on instinct. Some traders use technical analysis as their signal, some use timelines, and some may use price range or capital size as objective criteria for trading. It is recommended that beginners should also start with a simple trading strategy that is not overly complex or likely to backfire.

Understand the psychological preparation for losses

Any trader can lose money in the market, but the key point is to understand and adjust the mindset when we lose. As a beginner in the market, they may need to spend more time on adapting and exploring the market and preparing for potential risks. Many unsuccessful traders are reluctant to take the first step because they are afraid to face losses. They are also unwilling to accept the loss after opening the position and may end up being forced to liquidate their positions. Behind the success of professional traders is the accumulation of countless losses, because this is part of the trade. They will review their strategies to avoid repeating mistakes and manage risk for each trade, limit losses and protect profits.

Adjust for a trading mindset

Emotion is definitely an enemy of any trader, because failure to deal with fear and greed is the beginning of a bad trading. After making profits, some traders may overestimate their own abilities and skills, also the tempo of trading will be inevitably affected. Some may increase their positions recklessly, and others may prolong the time of holding their position for greater profits. Oppositely, when they lose a little money, they will start to doubt their strategy and magnify market news or data from a different mindset. When people are in a state of anxiety, they may try to make up for the losses with sporadic trading.

There are also examples where traders become too anxious and close or lock up their position too soon when losses occur. Some inpatient investors may close their positions too quickly when there are potential further profits available. These are common bad habits in trading, and this kind of undisciplined trading is not likely to lead to long-term success.

These are just a few of the basic psychology principles that need to be learned and understood as you trade. But as all roads lead to Rome, traders can also find their own unique trading strategy by interacting with fellow traders.

About ZFX (Zeal Capital Market) 
  • The Best Trading Platform Award 2019 from Financial Weekly, Regulated by FCA & FSA.
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5.Understanding the risks of investment correctly | ZFX


Risk Warning: The above content is for reference only and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations conducted in accordance with this article. Please be firm in your thinking and do the corresponding risk control.

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