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Psychology in Trading: Read till end!
Trading is a game of numbers and psychology.
While many traders focus on technical analysis and fundamental factors,
the psychological aspect of trading is equally important.
The 17 Differences Between Good Trades & Bad Trades:
Good Trades are made by managing the mind, ego, and emotions.
1. A good trade is taken with complete confidence, and follows your trading method. A bad trade is taken on an opinion.
2. A good trade is taken with a disciplined entry and position size. A bad trade is taken to win back losses the market owes you.
3. A good trade is taken when your entry parameters line up. A bad trade is taken out of fear of missing a move.
4. A good trade is taken to be profitable in the context of your trading plan. A bad trade is taken out of greed.
5. A good trade is taken according to your trading plan. A bad trade is taken to inflate the ego.
6. A good trade is taken without regret or internal conflict. A bad trade is taken when a trader is double-minded.
Good trades are just one trade inside a robust methodology that gives the traders an advantage in the long term.
7. A good trade is based on your trading plan. A bad trade is based on emotions and beliefs.
8. A good trade is based on your own personal edge. A bad trade is based on your opinion.
9. A good trade is made using your own time frame. A bad trade changes time frame due to a loss.
10. A good trade is made in reaction to current price reality. A bad trade is made based on personal judgment.
11. A good trade is made after identifying and trading with the trend. A bad trade fights the trend.
12. A good trade is made using the trading vehicles you are an expert in. A bad trade is when you trade unfamiliar markets.
Good trades are always managing risk to keep the trader in the game.
13. A good trade risks only 1% of total trading capital. A bad trade does not have a set amount of risk.
14. A good trade risks $1 to make $3. A bad trade risks losing more than it plans on making in profits.
15. A good trade follows a trading plan even during draw downs in account equity. A bad trade is a big trade made to quickly get even after a string of losses.
16. A good trade has a limited downside but an unlimited upside. A bad trade has unlimited risk and a limited profit.
17. A good trade has an optimum position size for that trade setup. A bad trade is based on feelings, financial need, or confidence in a trade.
From my book:
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