Understanding trading psychology plays a huge role in your success as a stock trader. After all, you are the driver of your success, so you need to understand how your mind works. One of the most important steps to long term trading success is getting organized and focused. You need to be able to narrow down your focus to the most profitable setups so you can nail them when the time comes. Focus doesn't mean you are staring at a screen for 6+ hours. It means you are attributing time to the things that make you the most money. Many traders struggle to focus properly, so I've compiled a list of a few ways to get focused when trading stocks.
Let's face it - we've all had those days where our watch list is too long to even remember. The market is hot, so we load up our watch lists because we don't want to miss out on any plays. Ironically, this can actually cause us to miss out on all of the plays. Unless you've developed some sort of hyper-focus, there's no way you can keep track of every stock on your watch list throughout the trading day. Instead of trying to load your watch list with a bunch of tickers, focus on creating watch lists with the highest probability setups. If you can find 5 solid plays for the day, you'll be good to go. Heck, all you really need is one solid play to profit on the day. When you create massive watch lists, you dilute your power as a trader. At Investors Underground, I send out a scan of about 10 stocks or less each night (depending on how hot the market is). The next morning, we analyze pre-market trading activity and narrow down the stock watch list even further. This allows us to focus on the most profitable plays instead of wasting our time trying to catch every move.
Technical indicators can definitely be helpful, however they may also be detrimental to your success if you use them improperly. All technical indicators are derived from a stock's price and volume; they are simply a tool to help you organize information better. If you use too many, you are overloading yourself with redundant information that can ultimately hinder your thought process. "The RSI says to buy, but the MACD says to sell, but the 135EMA on the 3-minute chart says a breakout is close. What do I do!?!?!" Simplify your approach to trading and eliminate unnecessary technical indicators. Focus on which indicators actually help you make better trading decisions. Some successful traders don't use any technical indicators, while others use quite a few. You need to find what works for you. If you decide to use technical indicators, you should focus on finding ones that help you make more profitable trades in an efficient manner.
If you try to catch every single play, you are destined to fail. You need to focus on what your strengths are and define a trading style accordingly. If you are constantly looking for short plays, long plays, news plays, earnings plays, etc, you are overwhelming yourself with too much data. Look at trades you have made in the past and focus on where you are making the most money. If you don't have a long trading history, focus on mastering a trading style that resonates well with you. You don't need to be a jack of all trades to make money. You simply need to master one trading style and constantly improve upon it.
In the world of trading, most of the messages you read are just noise. This may include message board posts, tweets, or analyst opinions. It's easy to get carried away by wondering what everyone else is thinking about a play, but ultimately, this is a road block on your path to trading success. "If John says to buy, but Bill says to sell, what do you do?" Focus on your own intuition and trading style so you can be on your way to self sufficiency. You need to determine which types of messages are actually helpful for your trading strategy and which ones just get in your head and confuse you. I'm not saying that you shouldn't take insights from other traders, however, if you are constantly looking for other traders to validate your ideas, you will miss out on a lot of great setups (and maybe even enter some sub-par setups). Ignore the masses and create your own trading plan.
Like any job, trading requires focus and clarity, so need to make sure that you place yourself in an environment that is conducive to your success. The ideal environment will be relative to your own personal needs. Make sure to eliminate distractions that hold you back. Do you have to take your kid to school in an hour? Does your messy desk distract you? Do you get sidetracked by social media? Don't trade under less than ideal circumstances. If you are trying to nail a trade, you need to commit your focus to the trade. If you are worried about what you have to do later in the day or keep getting distracted by pictures of ex on Facebook, you are not focusing the proper energy on the trade. Sure, many traders can multitask, but can you? Be conscious of what distracts you and work on eliminating those distractions.