Trading is a great prospect and surely an exciting one for those who just started to find their favorite market. But, it is also an intimidating game to play. People are jumping into the game with the certain intention to maximize profit and minimize loss flawlessly but in reality, trading might not always goes as smooth. One thing that plays a huge part in this is your emotion. Whether it is your anxiety or instinct that kick you to sell or buy your assets, your emotion may undermine your objectivity to how the market actually plays.
Now with this in mind, you’d probably think you’d just try your best to heartlessly operate your trades — bad news is your emotion is completely inevitable to experience and it will play a part whether you like it or not. What you should do instead is to embrace these emotions and use them to optimize your trades. How? By knowing how they work. Read on to know more about the psychological cycle of trading and why it is completely okay to not always perform flawlessly!
Optimism
Picture this. The market has been performing so outstandingly for so many weeks or months. You start to relax yourself and feel more willing to expand your assets and buy. Every doubt vanishes as your optimism continues to grow every single day. You can just see it, you, another success story people will look up to. Risks are non-existent for you at this point.
Excitement
This optimism escalates into excitement as you witness the market rises even more so and other buyers start to make a profit. You can’t be any more confident.
Thrill
Who would ever thought? The market continues to rise exponentially. Your confidence is at its peak as you start to see increase in profits.
Euphoria
You are delirious. Your profits come so easily there is basically no need to anticipate any risk management. Nothing can ever go wrong. Your lack of anticipation marks this stage as the point of maximum financial risk and profit as their confidence continues to rise as well as their willingness to expand their assets.
Anxiety
The market starts to goes against your side, losses are expected to come very soon and your easy profits don’t seem so easy anymore. However, you persist. You believe that it will all pay off in the long-term.
Denial
When the market didn’t recover as quick as you have expected, you keep on denying that you have made poor choices to your trade. You justify your losses on the conviction that the market will recover even better than ever sooner than later.
Fear
Your amount of losses are outstanding. Fear starts to kick in and you start to believe that you may not have been a wise Trader all along. You have no idea what to do.
Desperation
All gains you made are now lost. You’ve had your chance and you blew it. Out of despair, you try everything in your power just to be steady again.
Panic
It starts to dawn on you what all those losses mean to you. At this point, you give in to wherever the market decides to go.
Capitulation
You can’t take it anymore. You sell your assets at any price just as long as you can avoid worse losses in the future. Your portfolio plummets and regret starts to settle.
Despondency
You are completely done with trading. You convince yourself that it just might not be for you. You avoid it at all cost. This highlights a point of maximum financial opportunity for you.
Depression
You can’t believe how you could be so foolish, but this is the part where you realize what went wrong all this time. You start to evaluate your mistakes and, with a little bit of faith, learn from your past.
Hope
Not everyone reaches to this stage, but if you’re one of the portion, you will understand that market moves in cycle — and it always recover. You find hope and greater, newer opportunities.
Relief
The market goes well and as you start to reap profits, you regain your faith in yourself as a Trader.
So, yes, these stages may seem overwhelming for novice Traders — but it also shows us that you can’t control or manipulate the market and that there’s nothing you can do under horrid circumstances. It is okay to be wrong just as long as you learn from your mistakes. You’re not a robot that can heartlessly manage your trades and that’s what makes you so unique. You have the freedom to assess the situation as you want and even make wiser financial decision for your trades!
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See also: What Type of Trader Are You?
