Introspective analysis is one of the most important traits for any trader. How can you nurture this quality?

Saqib Iqbal Updated:

Learning Introspective analysis

Any trader or investor working on the market is faced with many problems and challenges that aren’t easily resolved through simple methods and approaches. There is a short list of factors, including greed, gambles, psychological pressure, hope, and ingenuity, that influence a trader’s effectiveness and ability to produce results. For these reasons, many private market participants often lose their funds, rather than generating their desired profit. The only way to resolve such situations is to maintain self-control and analyze your own market activity. It is on this question specifically today that we have gathered a wide array of materials aimed at uncovering several secrets to effective self-restraint, so as to enable traders to improve their trading results.

Introspective analysis is one of the most important traits for any trader

So, before delving into self-analysis, it is necessary to go through the most common problems encountered by private investors. As the list of factors that have an impact on success is relatively long, we will only go through the main ones:

The choice of trading partner – The majority of online traders, irrespective of their direction of trading or which trading tool they use, don’t think too much about their choice of trading platform. More often still, investors choose the platforms that aggressively promote themselves online. During this process, private traders pay little attention to aspects such as the security and technical resources of the service. Amidst the increasing number of frauds, the question of security plays a very important role and, of course, the technical tools necessary for market analysis help you achieve success on the market. As a result, investors, having chosen to partner with the first platform they came across, put themselves under far from ideal trading conditions, as well as the vast array of related psychological problems that arise when trading, leading to negative results.

The choice of trading tool – These days the market offers a wide variety of different kinds of exchange contracts, such as classic futures, options, online CDF tools and several short-term over-the-counter crypto options made from standard trading tools. Despite the wide range of trading tools, investors find it difficult to understand which resource will be most profitable and effective for them specifically. There are various ways to generate profit from trading tools and the inexperience of the vast majority of online traders limits their ability to access the full potential of trading contracts. This is why, more often than not, the success of a trader depends on the correct choice of trading tool.

An effective trading system. For every investor, the trading strategy followed is more important than the technical tool used. Despite the fact that most traders consider strategy as the selection of a specialized approach and method for market analysis and the identification of rate movement vectors, this investment tool involves a wider range of questions along with a deeper level of understanding. In this case, special attention should not only be paid to the system’s ability to correctly identify possible market movement, but also to issues such as money management, the best timing for conducting trading operations, the most lucrative assets and an entire array of technical and even psychological aspects of working on the financial market. Therefore, choosing the right strategy is one of the most fundamental factors for how effective a trader’s activity on the market is. Furthermore, most private traders’ choices of strategy are rather strange, as the vast majority of investors don’t even try to create their own system. Individualized systems are more effective and draw from adopted strategies.

Undoubtedly, certain systems, especially the most well-known, are very effective, but only if you have a complete understanding of how they work. In practice, this results in private investors who frequently choose strategies without evaluating them first hand, instead relying on third-party conclusions that are typically found in system descriptions. These investors lose their funds as a result of adopting a strategy without first testing it on the market and thoroughly analyzing it.

The technical trading factors outlined above have the most influence on traders’ results. Now, let’s go a bit into the psychology behind it.

The overwhelming majority of well-known traders consider the psychological aspects of working on the market to be more important than the technical trading tools themselves. We won’t bombard you with difficult psychological terminology and complex concepts. Instead, we will give you examples of several mistakes that investors often succumb to when trading on the financial market:

A lack of emotional discipline – Financial activity on free markets, especially online, is a very risky way to earn profit. It is worth noting here that while the vast majority of traders aren’t professionals, they do have easy access to credit and the opportunity to work with highly-profitable trading tools.   This combination in particular creates the majority of emotional and psychological problems. In general, investors lose funds when working with maximum leverage. Where funds are lost due to minimal asset price movement and a risky gamble. This is why it is so important to maintain a psychologically and emotionally balanced outlook when trading online. It is worth pointing out the interesting fact that this equilibrium in particular is the primary factor that influences a trader’s success in terms of psychology. What do we mean by this? It’s simple. When working with assets, you can be too careful when forming trading positions. Such a psychological regime can produce negative indicators! When traders are overly careful, they are too emotional. This leads to a mindset that keeps traders from seeing profitable conditions for trading. At the same time, trading thoughtlessly leads to losing control of the situation and concrete negative trading indicators. Therefore, successful traders strive to find an emotional equilibrium, control without paranoia and consistent analysis of the situation.

Inefficient restraint – Successful traders aren’t susceptible to mood swings, meaning that their work isn’t compromised by emotional outbursts either when they profit greatly, or when they experience a loss. This mentality leads to achievement thanks to a realistic understanding of their own  psychological and emotional shortcomings. Every successful trader knows their own faults and has an entire list of approaches for suppressing critical emotions. Online investors can take the following simple approach. When forming a trade, regardless of your emotional state, take a break. Even if it leads to a loss, either way, it is more likely to lead to profit if you take the break!

Identify the strong and stable sides of your own psychology – Traders usually fail to take advantage of their own talents and psychological strengths in their work. For example, for one person, it may produce better results to trade on the expectation of profit in the medium-term, however, for another, it may generate better results to hold losing positions in the hopes that there will be a trend reversal. By choosing the best regime based on your own psychological strengths, you create the most effective conditions for trading, which can become the basis for creating a technical strategy. Other than that, you gain the opportunity to most effectively maintain your profitable contracts and generate the most capital growth possible from them. At the same time, you can easily limit capital loss from losing positions at the level best suited to you. As a result, your emotions won’t threaten your psyche, and trading will only bring you financial results, along with satisfaction.

Overconfidence, one of the primary enemies of any investor! The problem can be divided into two parts. The first is the activity of inexperienced traders without any specialized education or basic understanding of trading. So, newcomers to trading typically start out hoping that they can just guess the vectors of market trends. We’ll tell you right now, that isn’t possible. Of course a certain number of the contracts will be profitable, however, you won’t be able to generate profit stably. Don’t allow yourself to get overly confident, invest a significant amount of time educating yourself on the main principles and approaches to trading. The second part of the problem is the activity of professional traders! Every professional reaches a point when they start to think that they know the market through and through and they can do absolutely anything, this type of ego is even more dangerous! The saying that even the best swimmers drown comes to mind. When applying this to trading, it is worth pointing out that professional investors with their vast experience and financial successes, due to their own egos, begin to violate their own rules for money management, ignoring trading strategy signals and their psychological mentality when working on the market. As a result, they lose significant capital!

An imbalanced relation to trading positions – It is relatively specific factor caused by the inner-consciousness of every individual trader. The issue is that investors more consciously and effectively consider larger contracts, but when it comes to smaller trading positions they can be completely thoughtless. Of course, it isn’t difficult to lose a contract for $10 or $100 dollars when you are operating on the market with an account with a great many zeros. But that is what the statistics show. Smaller contracts pose a greater threat to investors’ capital than larger ones! Therefore it is important to consider smaller positions as deeply as larger ones. There is no such thing as an insignificant trading position on the market!

As you can see, the technical aspects of working with financial assets, as well as an investor’s psychological outlook, are the main indicators of trading success. Therefore introspective analysis is the key to the success of any online trader.

How do you learn to analyze yourself?

The primary form of introspective analysis in trading is a trader’s trading plan! Specifically, a plan with clear-cut steps and signals leads to success. It is worth taking the time to highlight the most important points of a trader’s plan, they are the following:

Setting out concrete trading goals

The selection of a trading platform

Working out trading systems

Discerning the optimal time to trade

Creating a portfolio of the most effective assets

Analyzing mistakes that lead to the loss of capital

Evaluating the psychological aspects of working on the market in specific trading situations

● Identifying the factors that influence the capital curve

Today, it is easier than ever for online investors to maintain a trading diary and create a trading plan. The internet offers specialized resources that enable you to create a plan in real time without the need to invest too much of your own time. Don’t ignore it, see for yourself how much more effectively you can trade.

Other than a trading plan, it is vital that through introspective analysis you resolve the psychological problems that we previously touched upon. We’ll conclude with the primary ways of nurturing introspective analysis:

● Forming a clear trading plan with clearly-defined indicators and goals that you adhere to regardless of the circumstance

● Creating the most effective technical trading conditions

● Expanding your professional skills

● Choosing a psychologically and emotionally ideal trading regime, so as to more accurately identify your own strengths and weaknesses. Thus increasing your advantage on the market and ridding yourself of destructive emotions

● Remain humble and don’t gamble, trading isn’t a game, it is a serious analytical endeavor!

Once you have begun to introspectively analyze yourself and you have gained the self-awareness to effectively evaluate your own shortcomings, you can form your own ideal model for working on the market that will without a doubt drive you to the peaks of financial success!

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”