Stock Trading 

If you are planning to invest in the stock market you need to be able to handle the risks.  Some of the most successful traders will tell you that the key to successful trading is to be able to handle a loss.  Traders know that investing in stock is unpredictable.  Trades are never going to always go up.  Anyone trading in stock needs to know that a loss is inevitable and needs to be prepared to handle the setback. 

Some traders only define a good day of trading as one where they have made a profit.  Experts on trading psychology define a good day of trading as one where you have extensively researched and planned with discipline and focus and have follow through on the entire extent of the plan.  Good days will become more profitable in time when you have mastered the art of accepting losses and working through them with a well thought out plan. 

Because trading in an unpredictable market fluctuates greatly from day to day, it is important that you concentrate on what you can control.  Do not focus of things which are beyond your control.  When you only look at the short-term you cannot expect to be able to control the profits from your trading.  There are, however, things which you can control. 

By extensively researching the strategies you use within your trading experience you can have more control over whether it will be a good day or a bad day.  When you extensively research your chosen strategies you will learn in the long-term to generate profits.  Generating profits is the ultimate goal of every trader. 

Instead of trying to be a perfectionist it is important to become realistic.  Traders who try to be perfectionists equate a loss with failure and become obsessed with losing.  A realistic trader knows and accepts the unpredictability of the market and accepts a loss as part of the trading risks.  The most important thing to understand when trading is to learn to limit the losses instead of becoming obsessed with them.  When a trader is obsessed with losses he often has a hard time coming back from them and in the end winds up losing. 

According to the experts there are three basic strategist you can use to effectively reduce losses.  These strategies are time based, indicator based, and price based. 

Time based stops mean making use of your time.  Decide on a holding period you will allow to capture a certain number of points.  If you have not achieved the profit you desire within the time limit, then stop the trade.   

Indicator based stops make use of the market indicators.  When trading you should be aware of the indicators and use them extensively.  You need to look at indicators such as volume, advances, declines and new highs and lows. 

Prices based stops are generally used when either the price based or the indicator-based stops have not functioned for you.  For this price-based stop to work you will need to make assumptions about the trade and determine a low point in that particular market.  Set your trade entries near your points and you will make sure that losses will not be overly excessive if your assumptions are not correct. 

According to experts in the psychology of trading, setting stops and mentally rehearsing them is a good tool to use.  It can help ensure that you follow through on your strategies.