Become a better trader by working through free interactive courses on IG Academy.
Consistent profits are the aim for any trader, but, as Lee Sandford MSTA CFTe tells IG, the background for this to happen is for a retail trader to adopt the correct trading psychology.
Traders, Lee Sandford says, can be vulnerable to early failure because of a lack of discipline, which often leads to the trader running out of funds. To combat this there has to be an early adoption of a routine that forms the basis of a consistent practice.
Highlighting three main influences on consistency, Sandford talks about rules around the technical aspects of trading, as well as the mental and biological aspects that are needed.
Technical consistency includes going into a trade with an aim or a target. Meeting a target will either trigger an exit of a position or, if a trend is in place, an understanding of how to benefit from that market and to keep the profits flowing.
The mental aspects, Sandford says, circle around early successes or failures. There is a temptation for the unseasoned retail trader to expect that things will always go well after a period of success, and that there is no hope when things do not turn out as planned. It is at these two extremes of emotion when mental consistency tends to go awry. Linked to this are the biological aspects, where a trader must learn how the body reacts to the stresses of winning or losing, by over celebrating a win, or getting caught up in a depression following a loss.
To this last point Sandford looks at the different character types and suggests that you find out where you fit into the accepted psychological profiles. Knowing this will help you understand what your responses will be to a list of all possible outcomes.
IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
See important Research Disclaimer.