Here are 5 principles to help improve your psychology when trading:
1.Cut Losses Immediately When Realizing a Mistake
*For example, if you realize you've placed the wrong buy/sell order, incorrect volume, or deviated from your trading criteria, cut losses immediately. Recognizing and rectifying mistakes promptly demonstrates maturity.
2.Don't Overcrowd a Single Position with More Than 3 Trades
*Most account blowouts in trading occur due to overcrowding positions, especially with high leverage, and going against the trend during strong momentum. This can lead to account depletion.
*Overtrading often involves emotional decision-making, making it subjective. Without a clear plan for overtrading, it can become akin to emotional gambling, leading to difficulty in cutting large losses.
3.Don't Trade More Than 3 Pairs in One Day (Preferably Focus on One You Understand and Have Experience With)
*Successful traders often specialize in a specific coin or token, mastering its price movements. They consider it a gold mine. Trading fewer pairs helps develop an intuitive sense for the market, reducing the need for extensive analysis.
*Trading less frequently but focusing on quality trades often improves profits and minimizes losses in markets where you're not an expert. Even if you have a trading system, applying it to different assets can lead to different outcomes.
4.Reduce Trading Volume as Losses Increase, Balance Emotions, and Stabilize Your Mindset
*When losses exceed 3% of your account (or a predetermined threshold based on your account size), or if you lose 2 trades in a day, it's advised to stop trading temporarily. Use this break to review your losses, identify where you went wrong, and analyze how to improve.
*When you can't maintain a calm mindset and are driven by emotions, seeking revenge on the market is counterproductive. Getting emotional with the market leads to trouble.
5.Take Profits and Know When to Stop
*Taking profits is the most crucial skill for earning a living through trading. Profits should never be ignored.
*Stick to your own trading system when taking profits. Divide your profits into multiple tiers, avoid the regret of missing out. Remember that money is still there, the market remains, and opportunities are abundant.
*Always appreciate yourself for knowing when to take profits.