The Inner Trader
The Emotions of a Trader
Traders face a wide variety of emotions throughout the trading day. Emotions such as fear, greed, euphoria, and anxiety can make you a victim if you do not take control of them. A great trader should have a grasp of math and probabilities. The ability to calculate risk-reward ratios and quickly determine if the trade is worth taking is incredibly important.
A common mistake that the new trader makes is approaching the market with the gambler's mentality. The correct way to approach trading is to think of oneself as a casino. The casino has hundreds of gamblers that walk into its doors, and it knows that the more hands of cards it deals, the larger its stake will be at the end of the night. A casino has a statistical advantage over the gamblers. A trader with an edge, sound money management practices, and specific trading rules also has that same statistical edge over the market. A great trader knows, just like the casinos, that if he follows his trading rules and applies his edge to the market, over time he will come out ahead profitable at the end of the day.
A trader also has to have heart. The trader not only has to know what trade setups to trade, but also has to have the ability and confidence to take the setups. Some traders know what to do, but they do not have the confidence to take the setups that they know are important to be profitable at the end of the day. There are a couple of reasons why these traders ...