What is the financial market? Isn’t it a crowd or lots of people selling or buying all the time? Many people just want to make a profit in the market. All price changes are evoked by changes of sellers’ and buyers’ opinion about the good and ideal price for trading at the current moment and in the ongoing conditions. Understanding this fact opens a lot of opportunities for a professional trader because the crowd psychology is very simple and one-dimensional. Studying the crowd sentiments and being out let you catch the moment of changing the tendency in the market and start or stop trading successfully. If the trader follows the crowd, is a part or stands against it his capital can easily become just memories.
Technical analysis is the method helping to determine the crowd sentiment and its direction. The chart history and statistics show the changes of the traders’ sentiment during the whole trading period for every instrument. Mathematics and formulas will not be much important here but the trends and different price patterns will help us to understand a situation in the market.
At the same time you should not forget about the individual trader in the market whose psychological state is often more important – about yourself. In many situations our mood affects trading result and determines if we earn or sink with the other unlucky traders. The trading situation usually changes very quickly and incalculably creating hard terms for work, baring our problems with the character and behavior and discovering all our personal imperfections. It often happens because the market is a jungle full of dangerous varmints who are ready to attack a careless player. All participants of the market are ready to use any chances to make a profit and they will notice and use all our mistakes and miscounts.
But we are not banks or funds. We are just online traders and the evil men and women from the large market will not threaten us as we are not important for them and have no influence on a trading situation. Only our weaknesses and psychological aspects can threaten us. The trading psychology helps us to study not only basic motivators of the crowd in the financial markets but gives an opportunity to understand ourselves and discover our weaknesses separating us from millions in profit. The methods of analysis are surely important and give us a perfect instrument but it becomes useless because of our weaknesses. The trader having the best strategy and losing his head over the unprofitable deals reminds a drunk driver of the luxury car on the mountain spiral road. As you can guess the crash for both is unavoidable. Our psychological qualities do not allow us to use successful trading methods at the beginning of trading career and work out our own strategies in future.
Trading in the financial market is not only the chart analysis and price forecasting because you spend more efforts to work with yourself. If the trader works at his mistakes and understands his own weaknesses he can achieve a great and stable success. Understanding the psychological aspects of trading will drive a new trader to success.