Confidence is one of the most crucial attributes in any career, and trading is no different. If you’re not a confident trader, you’re not likely to find success, not long-term at least.
When I trade, I’m confident that my decisions are backed by my own due diligence and therefore are good decisions that will most likely work out in my favor. Without that confidence, I’d be worried the entire time I hold a stock, worried it will fall due to some unknown factor.
My confidence also allows me to accept losses and move on without a second thought because I know there will be more wins in the future. In this article, I will go over every reason that confidence is crucial for trading.
Helps make Decisions
As I mentioned in the introduction, every trade you make should be made after doing your own due diligence. If you’re not confident in your ability to do said diligence and perform proper research, then you won’t be confident in your buy.
I probably don’t need to go over every reason you need to be confident in your trades, but you do. Without the confidence, you shouldn’t be trading, period. Because you will lose money, and most of the time, you will lose it in a situation where you could’ve made a profit.
Confident in your Holds
I can’t count the number of times someone has told me they saw red and sold too early, only for the price of a stock to skyrocket the next hour while they were on the way to work. I’ve even made this mistake early in my career, although my missed opportunity wasn’t as prominent as some.
Having confidence in your buys allows you to hold through the red and come out on top. Without that confidence, or proper due diligence, you may sell too early, or worse, you won’t realize when you should sell. There’s a difference between confidence and cockiness.
Avoids FOMO
FOMO or fear of missing out plagues the trading industry and has caused more losses than anything else. When everyone is buying a stock and making money, naturally, you’ll want a piece of the pie.
Confidence allows you to look at a stock, do your research, and ignore all of the hype and what everyone else is saying so that you can make your own decision. Avoiding FOMO at all costs is one of the best ways to improve your financial literacy.
Lets you Make your Own Decisions
Speaking of making your own decisions, that’s one of the best side effects of being a confident trader. You can ignore the hype and avoid FOMO. It also allows you to use stock screeners and scanners to their full potential.
Without confidence and skill, a rookie may use these tools and still end up making incorrect trades, while someone with confidence can use the tools as they were meant to be used; as an assistant, not a stock picker.
Avoids Tilt on Losses
Every trader will experience losses; that’s part of the game. You just have to prepare for uncertain market conditions.
Many will even experience more losses than wins and still end up being some of the most profitable traders in the business. The trick is to make more money on successes than losing on losses.
Confidence allows you to look at losses analytically and not emotionally. It will enable you to stick to your trading plan and not turn bad days into career enders.
Roger Scott WealthPress 