trading Share Market Being a professional athlete is similar. Both are judged by their daily performance. To develop emotional resilience you need to develop habits.
This means that the wild fluctuations in the stock market should not bother or bother you. The ups and downs of the stock market are a normal part of the investment journey. You need courage and agility to be ready for any directional move.
Where it is easy to do. Our brain works hard to let emotions control us. When we see a pile of red on our positions, the “fight or flight” instinct is triggered. This leads to a knee-jerk reaction, which can be costly and prevent us from achieving our goals. So, how do you avoid emotions when trading? Here’s a look. I always emphasize that investors need to present themselves as self-employed entrepreneurs. This requires a dramatic change in perspective. If you consider investing as a hobby, you will not be able to set your goals. This can make it difficult to achieve sustainable progress.
Write a business plan, list your goals, find out your risk profile and the amount you want to invest. What will be the source of this capital? How much can you lose? By mentioning these things daily, fear and greed will be controlled. When you view business as a business, you are less likely to make decisions even out of boredom.
accept the feelings
You need to consider putting some time between the impulse to act and your investment decision. This is true whether you want to buy or sell during a downtrend. Various studies have indicated that breathing exercises can help you stay calm, productive and rational when dealing with stressful situations. Research further proves that different forms of breathing are associated with different emotions, so the way you breathe can have an effect on how you feel. Changing the rhythm of your breathing can signal relaxation to your brain. This will give you time to reevaluate your approach towards investing.
market research is crucial
Emotions sometimes creep in when you don’t know what to do in a particular market situation. So you need to stay updated with the market fundamentals. Focusing on companies with great quarterly results may not give you the full picture. Understand the underlying macroeconomic factors, both domestic and global. Be aware of all geopolitical developments that can trigger market volatility.
Look for new educational resources, such as analyst opinions about undervalued stocks, price forecasts and economic analysis. From time to time intensify your research with a fresh newsletter. You may find something that fundamentally changes the way you invest or something you don’t agree with.
Either way, when you make a focused effort to always learn something new about investing or the markets, you’ll have a fresh perspective and confidence. It makes you a more educated trader and breaks the cycle of emotional trading.
always remember the past
When the next time the market goes down, remember that this is not the first time and it will not be the last. Globally, stock markets have overcome many hurdles over the decades. For example, Indian equity markets 12 March 2020 saw the biggest single day drop in absolute terms as WHO declared COVID-19 a global pandemic. The benchmark Sensex was trading 8.2% lower at 32,778 points and Nifty 50 was trading 8.3% lower at 9,590. But till March 15, 2021, Nifty 50 was trading at 14,772.62 points higher than the pre-pandemic levels.
After every global crisis, the stock market has recovered and reached new highs. Also remember, even if the stock market falls, your entire portfolio may not collapse. If you have a well-diversified investment portfolio including equities, bonds and other assets, your panic can be significantly lower.
By now, you must have read various buzzwords and phrases in articles or books. stick to yourself business plan. Have patience and discipline. be in the zone.
They are all logical, maybe even encouraging. However, unless your mind is calm on the domestic front, and you are in healthy mental and physical health, you cannot follow these steps. So, consider some off-the-market tricks, such as regular exercise, doing something creative in your spare time, reading a book, etc. These things can stop your mind from stagnating in the markets.
Finally, accept that mistakes are made by even the best business minds. How to Respond to These Mistakes What separates a good trader from a great trader? Learn from them and keep looking forward.
(The author is MD & CEO, HDFC Securities)