Psychological Factors Affecting Day Trading

As a day trader, you may have recently experienced the role of emotions in the evolution of stock markets. With the spread of the COVID19 pandemic, even companies with strong fundamentals have experienced a sharp decline in their stock prices. Some have fallen to their lowest level in 3 years. Why did this happen? This article talks about the psychological factors that could affect your trading strategies. Being aware of these factors can help you as an individual investor and study the market during times of high volatility.

Merchant's Remorse

Although buyer’s remorse is an important term in the field of cognitive dissonance, it also has an interesting connection to buyer and investor behavior in trading. actions. Most of the time, we find that people publish their business decisions.

It is wise to be “Fearful when others are greedy and greedy when others are fearful.”
– Warren Buffet on his trading strategy

Blinding Lights

Investors often end up following a market trend, even if it goes against their intraday trading strategy. This especially happens in a very volatile market where you are so confused by the general market movement and forecasts that you focus less on your information. Following a herd is sometimes dangerous and can cause anxiety after the trade.

Your friend told you that yesterday he made a big transaction and made a net profit. The next day, you try to do the same job, without getting good results. Enter FOMO, or Fear of Missing Out. FOMO refers to the fear of missing out on big opportunities due to outside information or when stocks are highly volatile. FOMO makes traders anxious about trades they didn’t take.

What can you do about it?

Trading with emotions is almost never a good idea. So how can you make sure you don’t fall prey to this emotional roller coaster? A solid fundamental knowledge of the markets and a good trading strategy.

A strategy based on which you will make your trading decisions can not only save you from the influence of the market, but also make your process easier and faster.

A solid understanding of market fundamentals can go a long way and reassure you that you have a great strategy.

If you think you’re stuck or missing crucial results, it might be a good idea to seek help from a professional trader or advisor. Be careful who you choose to get help from a proper verification process. Check out their past accomplishments, talk to your friends, and read online reviews before committing.

An automated trading software/platform can help you create a solid trading strategy. Some platforms can also trade on your behalf, taking the emotions out of the equation.

Creating data and trend-based strategies is now possible through these trading platforms. Trading techniques like Algorithmic Trading (or Algo Trading) can be a great solution for removing emotional barriers from your day trading process.

Besides these platforms are much more accurate than a manual trader. So you get a platform that is uncorrupted by human emotions and makes trades at the exact moment for you.

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