Psychological Factors Affecting Day Trading

As a day trader you might have experienced the role of emotions in moving the stock markets recently. With the spread of COVID-19 pandemic, even companies with strong fundamentals saw a marked drop in their stock prices. Some dropped to their 3 year lows. Why did this happen?

This article talks about the psychological factors which might affect your trading strategies. Being aware of these factors can help you as an individual investor as well as study the market during high volatility periods.

Trader's Remorse

Although buyer’s remorse is an important term in the field of Cognitive Dissonance, it also has an interesting link with buyer’s and investor’s behavior in stock trading. Most of the time we find people regretting their trading decisions. A trader might feel that they bought/sold a stock too early or too late, or maybe now they prefer to buy something else.

Traders remorse is generally caused by some new information presenting itself. Maybe you saw the stock price go in a different direction than you expected, or maybe your highly-regarded friend told you something you didn’t know about the stock you just traded.

Having a good personal strategy is helpful to save yourself from remorse later. If you have a clear entry and exit criteria you can better control your positions and investments.