Get the better of your biases when you trade stocks

There are eight key psychological pitfalls that can part inexperienced investors from their money. Michael Taylor explains what they are – and how you can overcome them

Shouty stock trader
Controlling our own psychology is easier said than done
(Image credit: © MAURICIO LIMA/AFP via Getty Images)

Trading is one of the most brutal pursuits on the planet. There is little risk of physical harm such as a broken appendage or being punched in the face, but psychologically it can be difficult and at times, even stressful. I’ve heard of traders who’ve put their entire house deposit into the market and lost it; some have squandered their life savings betting on a single stock.

Trading can be profitable, but it can also be cruel. Sometimes you can do everything right and still lose money. You can have an edge, but nothing is guaranteed. Still, there are many things that we can do to increase our chances of success. We can control our entries, our exits, our position-sizing, risk management, how well we actively manage and monitor the trade – and also our mindset and psychology.

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Michael Taylor is an ex-trader. For more from him, see shiftingshares.com.