Today, I want to talk about a certain aspect of day trading, or any trading for that matter…
This is something that is just as important, if not more important, than studying the technical indicators, price patterns, and company financials.
I want to discuss the psychological component of trading…
Success isn’t just about knowing when to buy and sell. It’s also about managing your emotions and maintaining the right mindset in a very fast-paced, stressful environment.
In fact, this all comes full circle…
Why?
Because mastering your own psychology will improve your process…
Plus, the psychology of trading, in itself, can help predict stock movements.
Day trading is intense. The market moves quickly, and so do your emotions. Fear, greed, excitement, and anxiety can all influence your decisions, often leading to costly mistakes.
Table of Contents
Psychological mistakes in trading can be financially costly.
Fear of Missing Out (FOMO) is a powerful emotion that can lead you to make impulsive trades.
Have you ever seen a stock spike and feel like you’ve missed out on the party? Or profits, in this case…
FOMO can cause you to jump into a trade, often too late, without proper analysis. You end up buying in at the peak and suffering losses when the price corrects.
Overtrading happens much more often than you think…
Trading is thrilling…believe me, I know! But sometimes that high can lead to making too many trades in a short period of time.
Traders think they need to capitalize on every single perceived opportunity out there.
This behavior racks up transaction costs and also increases your chance of making costly errors.
Revenge trading happens when you think you need to make up for past losses.
You make rash decisions and enter trades too quickly without proper planning, often resulting in even bigger losses.
Traders often seek information that confirms their existing beliefs or positions. This confirmation bias can blind you to important market signals that go against what you expect and lead you to poor trading decisions.
Don’t worry, I have strategies to overcome the pitfalls of trading psychology.
Develop a Trading Plan
Define your entry and exit points, risk tolerance, and trading goals. With a clear plan you can stay disciplined and reduce emotional decision-making.
Do you have a trading plan?
Read my article to learn how to build one.
Practice Patience
Patience is a virtue in trading. Sometimes, the best trade is no trade at all. Waiting for the right setup and sticking to your plan can save you from unnecessary losses.
Embrace Losses
Accepting losses helps you maintain a healthy mindset. You’ll learn from your mistakes and use them to refine your strategy, instead of letting them get you down.
Use Stop-Loss Orders
Setting stop-loss orders helps you limit your downside by automatically selling a position when it reaches a certain price.
This can prevent the runaway train of small losses that quickly turn into catastrophic ones.
Keep a Trading Journal
You can learn a lot about your trading and your mental state by documenting your trades in a journal.
By writing down your thoughts and emotions during each trade, you can identify patterns in your behavior and areas for improvement.
That part above was all about making you a better trader by understanding your own psychology….
Now let’s find out how trading psychology itself can help identify price patterns.
My mentor, Tim Sykes, has developed an in-house system that leverages AI to track stock patterns and craft strategies for those stocks.
Here’s how this tool came to life…
Tim has been using the same 7-step trading framework for 20 years, starting back in his college days.
This framework is built around human emotions like fear and greed.
Tim discovered that this psychological approach works perfectly with stock movements.
Read this article to learn more about Tim’s 7 steps.
Enter the era of Artificial Intelligence…
Tim recognized that AI was the ideal tool for capturing these stock patterns and creating trading plans to profit from them.
The result is a fully developed system called XGPT, which can be used in two powerful ways:
Use #1: Every trading day at 3:15 pm Eastern, XGPT sends out a watchlist. This list includes stocks most likely to spike and the expected trading pattern.
It provides a probability of success, like 70% or 80%, along with a potential buy signal, a potential sell target if things go well, and a stop loss level if they don’t.
Use #2: At any time, a trader can log onto XGPT and enter the ticker symbol of a stock they’re watching.
XGPT will then generate a potential trade plan and probability of success, just as if they had asked Tim himself.
It’s really cool and produces a response much like ChatGPT answers a question.
And trust me, XGPT is the real deal! The proof lies in the massive winners it has found…
On June 12th, XGPT alerted us to Longeveron Inc. (NASDAQ: LGVN) with a buy price of $1.80 per share. It hit that price late that afternoon on the same day.
If you exited at the target price that XGPT suggested, which it hit the following day, you would have made 28.89%.
But, if you held out even longer until it hit its high of $3.09 on the 13th, you could have booked a 71.67% profit*.
XGPT alerted to Nexalin Technologies Inc. (NASDAQ: NXL) on June 20th. The suggested entry was $1.35 per share with a sell target of $1.68.
The next day, after NXL hit its entry, it reached its sell target within minutes for a return of $24.44%*.
However, if you bought in at $1.35 and held out until it peaked that same day, you would have doubled your money!
And then there was Nano Nuclear Energy Inc. (NASDAQ: NNE), which showed up on XGPT’s June 24th watchlist…
NNE hit the entry price of $23.25 per share the next morning and then hit its high for the day at $37.51 for a win of 61.33%*.
Just last week, XGPT alerted us to Annovis Bio Inc. (NYSE: ANVS) with an entry price of $10.95.
The stock then soared to a high of $17.32 on Monday, booking a 58.17% gain*.
There are lots of XGPT winners like these but I don’t want to waste any more of your time…
Watch this presentation to see if this powerful tool, which uses AI and trading psychology, is right for you.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade