Trading in stock market is similar to being a professional athlete: 5
Trading the stock market is similar to being a professional athlete. Both are judged by their daily performance. You need to cultivate habits to develop emotional resilience.
This means wild swings in the stock market shouldn’t make you nervous or jittery. The ups and downs of the stock market are a normal part of the investing journey. You need the courage and agility to stay prepared for any directional moves.
It’s easier said than done. Our brains are hardwired to let emotions take control. When we see red stacking up on our positions, the “fight or flight” instinct kicks in. This leads to knee-jerk reactions, which can be costly and prevent us from achieving our goals. So, how do you avoid emotions while trading? Here’s a look.
I always emphasize that investors need to treat themselves as self-employed entrepreneurs. This requires a dramatic shift in perspective. If you treat investing as a hobby, you won’t be able to quantify your goals. This could make it difficult to achieve sustainable progress.
Write a business plan, list your goals, figure out your risk profile and the amount you plan to invest. What will be the source of this capital? How much can you afford to lose? Outlining these things daily will keep fear and greed in check. When you treat trading as a business, you are less likely to make decisions out of boredom too.
Acknowledge the emotions
You need to consider putting some time between the impulse to act and your investment decision. That holds true for whether you want to buy the dip or sell during a surge. Various studies have indicated that breathing exercises can help you stay calm, productive and rational while dealing with stressful situations. Research further proves that different forms of breathing are associated with different emotions, so how you breathe can have an impact on how you feel. Changing the rhythm of your breathing can signal relaxation to your brain. This will give you time to re-evaluate your approach to investing.
Market research is crucial
Emotions sometimes creep in when you don’t know what to do in a particular market situation. This is why you need to stay updated on market fundamentals. Focusing on companies with great quarterly results might not give you the entire picture. Understand the underlying macroeconomic factors, both domestic and global. Be aware of all geopolitical developments that may spark market volatility.
Seek new educational resources, such as analyst opinions about…
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