Theoretically, the ability to make money on stocks involves two key decisions: buying at the right time and selling at the right time. In order to make a profit, you have to execute both of these decisions correctly.
Many investors have trouble selling a stock, and sometimes the reason is rooted in the innate human tendency toward greed. However, there are several strategies that you can use to identify when it is (and when it isn't) a good time to sell.
The most important thing about these strategies is that they attempt to take some of the human emotions out of the decision-making process.
MINDSET
Trading psychology may sound like a made-up term but it is a very real thing. Financial
markets have no emotions, but we as people do. To achieve a long-term career as
traders,
it is very important to cultivate a mindset in which we can remain calm while
trading and avoid succumbing to emotional reactions.
The following are some of the examples of mistakes that we make while trading and
whose cause is psychology: Taking bad trades
Cut losses too late
Not taking good trades
Taking too much risk
Don't take profit on winning trades
THE EMOTIONS OF TRADING
Overcoming emotional barriers is one of the first problems that people who start
learning to trade face.
“SWING TRADER”
Using an intermediate time frame, usually a few days to a few weeks, swing traders will
identify market trends and open positions. The name swing trading comes from the fact
that we are looking for conditions where prices are
likely to swing either upwards or
downwards.
Swing traders can use a wide array of technical indicators. These indicators are used to
find trends that play out between 1 and 30 trading periods.
After analyzing these
periods, you will be able to determine whether instances of resistance or support have
occurred.
The next step is to identify the bearish or bullish trend and look for reversals. Reversals
are often referred to as pullbacks or countertrends.
Terminology for new traders:
THE STOCK MARKET
It is a place where shares of public listed companies are traded. The Stock Market allows traders to buy and sell stocks as well as companies to issue stocks.
STOCK
All of the shares into which ownership of the corporation is divided.
STOCK SYMBOL
A one to four character alphabet symbol which represents a company listed on the exchange.
SHARES
Units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends.
DIVIDEND
A dividend is the distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors. Payments made by publicly listed companies as a reward to investors for putting their money into the venture.