How Psychology Lessons Impact Trading & investing Decisions

In the world of trading and share market investment, is decision-making only driven by mathematical calculations and technical analytical skills? To believe that is a delusional stance because we cannot ignore or overlook the often underestimated yet strong underplaying element responsible for decision-making, and that is human psychology. No matter how technically advanced and well-equipped a modern-day trader may claim to be, their decisions are inherently driven by their emotional core, their preconceived biases, and their powerful instincts.

Trading choices made by these individuals are backed by the cognitive processes that take place inside a trader’s brain. They can be either inclined towards fear of missing out on potential trading opportunities or maybe overconfident with the hunch of winning any trade. This profound interplay of psychological aspects and nuances of trading helps potential traders and share market investors navigate the landscape of constant decision-making and juggling multiple emotions. In this blog post, let us unravel the deeper soils of this constant interplay and gain an in-depth comprehension of how to control our psychological instincts and make informed decisions.

  • Making calculated decisions: No matter how alluring any stock of NSE Nifty 50 or any financial instrument may look, it is crucial to check one’s appetite for risk factors before investing a penny. Instead of only looking up for profits, we must look down first to ensure that we firmly hold our ground. So that if things go awry, we don’t end up being uprooted by the tides of volatility and unprecedented waves. Especially when the market looks awfully unpredictable, one should pay critical attention to position sizing.

  • Creating mental roadblocks: As barriers are necessary on the roads to prevent accidents from taking place, similarly, these mental barriers are necessary for us to prevent falling into the pitfall of impulsive trading mistakes. Be it intraday trading at BSE or long-term investments, one must ensure to adhere to certain self-created guidelines instead of being swayed away by what other traders are doing or by self-framed biases. These rules should be necessarily followed to navigate the uneven terrains of the trading landscape seamlessly. 

  • Manifest both best and worst: Being optimistic is useful, but being practical is far more effective as it prepares you for all types of outcomes. Future cast your winners so that you have all the scenarios well planned; even if things go south, you would know what effective measures could be adapted to control the damage to a great extent. 

  • Failures are inevitable: New paths have obstacles. For beginners in the realm of online trading and investing in NSE or BSE, a few setbacks are bound to take place. Reaching the top without minor downfalls is an unrealistic standard of success in this or any other domain. The ideal way to move ahead is to learn from the mistakes, no matter how many of them, because after a series of learning and unlearning, one will be able to rise like a phoenix from the ashes. Facing failures and learning from them build resilience, which eventually aids in success in the long run.

Online trading is a vast domain with a variety of options to gain profit, provided we navigate through this virtual arena with the right arsenal of tools, knowledge, and balanced psychological instincts. In a typical trading scenario like options trading, you may end up losing more than what you invested with a single trading mistake and infinitely more. So, there needs to be a critical approach to handling trades with eagle-eye attention to detail, and traders cannot afford to make decisions based on their emotional biases as it would be an ultimate recipe for disaster.