In order to be an effective day trader a speculator needs to be able to control their emotions. A person can have years of market knowledge, the best schooling, read the world's greatest books, be able to quote the leading financial experts and still be a bad trader. While it is important to understand the complexities being generated via technical and fundamentals and the power of behavioral sentiment, again it doesn't guarentee you profits.
When a day trader initiates pursuit of position, long or short, they can even be right about the eventual direction and still lose their money when the trade is complete. The missing link for many speculators while trading is their inability to control their emotions.
Many sports fans know that there are teams that have some of the highest paid athletes, but frequently have lackluster results because the team is not able to handle the bright lights of the stadium, they let crowds affect them. Some teams simply prove over time they are not prepared to really compete in the most important games; trading results frequently are similar when a speculator is not ready for the financial market they want to compete within.
Unless a market participant can handle their anxiousness, nervousness, frustration, assaults from value gyrations (reversals of price), doubts and the noise of the crowd (news being generated from the media that is mere hyberbole) and other challenges that can affect their emotional state - a trader is unlikely to have success.
Sports and trading are very similar sometimes. Professional athletic competitions between the world's best are often a contest of 'wills'. In many sports the top athletes are almost equally matched regarding their physical ability. In trading many speculators have the same perspectives regarding potential market directions, yet they produce different outcomes.
The difference maker in sports and trading when it comes to positive results - winning, is the ability to control their emotional state. Remaining calm and focused, knowing the goal and tasks that must be accomplished to achieve victory in sports and trading is often the result of keeping tranquil psychologically in the middle of battle.
You can have all the necessary trading skills needed to pursue a position within Forex, equity indices, commodities via the cash market, CFDs and futures, but if you do not have control of your emotions you are likely to lose.
Day traders also need to understand that one day of results, winning or losing, does not mean anything regarding future prospects. Like the best athletes, traders need to enter every trade as if it is a new game. Discipline, tactical objectives are important in trading. Being able to walk away from a losing position and leaving enough in your account to pursue the markets, for the next time you feel there is a potentially profitable objective that is attractive is also important.
You must know yourself to be a good trader, you must understand your own emotions and work on weaknesses. The ability to be profitable over a long time is not as simple as merely entering your online trading platform and opening a position which has been recommended or that you think is a winner.
It is one thing to understand the positive movement of a potential trade, but you must be ready for the negative possibilities when a trade is not going your way and the ability to navigate through the storm. Is your stop loss in place? Does the amount of leverage you are using allow you to walk away from a losing trade and still have enough ammunition (money) for other trades? Can you handle the volatility that is likely to ensue in potentially choppy conditions?
You need a solid gameplan. One of the greatest risks a trader is confronted by is their lack of emotional fortitude. Successful speculators embrace their trading positions because they are attractive, but they also manage their expectations and have a plan of attack in place before they enter every trade. Good traders can block out the noise of the crowd and enjoy the competitive nature of battling the financial markets.