Trading psychology is about analysing market sentiments, while keeping your emotions under control. It primarily relates to market dynamics and buyers’ sentiment. Market dynamics allow traders like you to know the financial market’s overall mood and current sentiment- whether bearish or bullish. Market dynamics are usually the result of conditions created by notable events from the past, company reports, economic data releases, and geopolitical tensions.
Meanwhile, buyer sentiment tackles individual investors’ psychology, which is often guided by their past experiences and expectations of what can happen in the near term. That is commonly used in a negative context, because a wise trader knows how to keep a cool head under the heat of the summer instead of making decisions based on how he/she is feeling. The big challenge of trading is overcoming your emotions when you win or lose, while determining whether the overall market is behaving rationally, or it is a situation where many traders are only going with the crowd.
Many negative emotions can ruin one’s trading play, but fear and greed are the two common factors that affect traders the most. Being afraid of losses is a fear that every trader needs to overcome at some point. While it doesn’t feel good to see a losing position, remember that even the world’s well-known traders don’t get it right a hundred percent every time. The way to approach fear in trading is to accept that trading always has its ups and downs, learn from your mistakes, and continue working on your technical and fundamental analyses skills.
Greed can convince traders to keep a position open for too long so they can hit an even bigger jackpot, only to miss the right time to close it, ending up with a loss. That is why having and sticking to an entry and exit plan is crucial. Overall, improving self-awareness and understanding how your emotions play a role in your decision-making is key to controlling them. Once you have the right level of rationality and emotional detachment, you’re on your way to becoming a master of the markets.
Understanding sentiment and reading price actions or charts perfectly will help market players profit from volatility and changing trading environment in any market cycle, especially now that we are witnessing structural changes and fixing from the fiscal and monetary policy makers.
So, watch the charts below as bargain hunters take advantage of pullbacks in the midst of ongoing portfolio rebalancing and sector rotation:
NGXASI Weekly (Opening chart)
NGX Consumer Goods Weekly
NGX Banking Weekly
NGX Insurance Weekly
NGX Industrial Goods Weekly
NGX Oil/Gas Weekly
Dangote Sugar Weekly
Zenith Bank Weekly