Traders worst enemy "Emotional trading"

Schwager wrote: "In our experience, investors are truly their own worst enemies. The natural instincts of many lead them to do precisely the wrong thing at the wrong time--with uncanny persistence…

Proletarian can feel high with the trading or investing excitement. At the short interval of time nobody can get high and make money. Voracity and panic are bound to destroy any trader or investor. Instead of trading on gut feeling, one needs to use their intelligence. Road to untold riches can be open by conquering our emotions of fear and greed.

It’s a human’s natural inclination to follow the crowd. But when it comes of trading, following the crowd can often be make extreme effects. The shrewd trader knows how to look forward to the trend and they also makes sure that he or she sells before the style reverses, and the masses start selling

To become victorious, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior. In the markets, it is sometimes useful to be conventional. For example, for long term investing, it is wise to put your money in stocks that don't have a great deal of instability and by all indications, have solid fundamentals that will push the stock up consistently for several years. If a large enough crowds believes strongly that the company will produce profits for decades, it would be to your advantage to follow them, if you want a safe investment.

Even though following the crowd isn't bad all the time, there are times when a trader should not follow the crowd. Traders are looking for instability and a good chance for making a big profit. Most of the time that means going your own way. It requires that one think like contrarians, where you are trying to guess what the crowd will do next and trying to capitalize on it. The key is to know when to follow the crowd and when to go against it. The crowd is usually right, until a turning point occurs. When virtually everyone has taken the position that the market is headed in a particular direction, there are almost no traders left to push the trend further. At that point, a countertrend initiates and moves the market in the opposite direction.

The challenge is predicting when that turning point will occur, anticipating it, and developing a trading plan to capitalize on it. Now, this all sounds easy in theory, but in practice, it is difficult to implement a trading strategy to capitalize on this cycle. How can one predict the turning point? Some say it is almost impossible. All you can do is develop a sound method that works most of the time but also admit that it may fail. Whether you use technical indicators or you are lucky enough to use the media news to your advantage, you must temporarily believe in your method, put money on the line, and work under the assumption that overall, luck will be in your favor should you make enough trades.

Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others. One must creatively study the markets and try to devise an innovative trading plan. It takes a great deal of experience and thought, but by using the proper perspective, gaining extensive experience, and honing your trading skills, you can break away from the masses, and trade consistently and profitably.

The human body and mind operate much like a machine in that they need preventative maintenance. Just as you wouldn't drive a car without routinely changing the oil or checking the tire pressure, you shouldn't over-stress your mind or body without taking a rest so as to allow yourself to rejuvenate. Trading is a stressful business. Traders continually must cope with uncertainty and endless setbacks, and these factors tax the mind and body to the point that they can no longer function efficiently. Make sure you do preventive psychological maintenance so that you can always trade in a peak performance state.

Trading is intrinsically motivating. It's fun and exciting, but any activity can become boring and tedious if you have to do it over and over again, and do it quickly and under pressure. Trading is fun when you first start, and if you trade as a hobby, but the professional winning trader must persist under less than ideal conditions. Many times a trader must make trade after trade to allow the law of averages to work in his or her favor. The search for winning trading strategies is endless and a challenge. Even the most passionate trader eventually finds trading stressful and tedious. The long-term ramifications of a tedious and anxiety provoking profession can be severe. The mind and body have limited resources, and when these resources are depleted, one cannot continue to function efficiently. Eventually, one needs to take a rest and allow mental and physical abilities to recuperate.

In the long term, it is vital that you take vacations from trading. If you trade month after month without a break, you'll get burned out, and the activity you are passionate about will turn into something that you hate. By taking a vacation, you'll not only get some important rest and relaxation, but you will get a new perspective. You'll see trading in a new light and remember why you like trading so much. When you return, you'll trade with renewed vigor and that will help you trade efficiently over the long haul.

Winning traders execute and monitor their trades while in a peak performance mindset, a mindset where one is calm, logical, and determined. When you are stressed out and worn out, however, you can't cultivate this mindset. It is vital to take rests so that your mind and body can rejuvenate. By doing preventative maintenance, you can trade with a mindset that ensures consistent profitability.