Published On: Mon, Sep 5th, 2016

Financial Principles You should Use Even If You are Not a Trader

Life has a number of  problems that we need to solve. Some are simple like how to clean the house quicker or how to fix a leaking faucet, some are more difficult and are yet to be solved such as how to cure cancer and some are in the middle, often times varying among individuals. These are common problems or tasks such as time management, money management, goal setting and more.

There are tons of books, articles, videos and audio clips with hours worth of advice on these topics. Some of that advice is great, some is average, useful but nothing groundbreaking and others are absolutely worthless.

Financial Principles You should Use

One thing that many people have problem with however is applying the advice they get from these sources to their everyday lives.

Some things are great in theory but if you can’t put into practice then it doesn’t have much value.

However there is another way to find solutions to these problems. That is to look beyond general self help category and look towards a field you never really considered for solutions to these issues before.

Sometimes the answers we seek is where we least expect to find it.

In this case, it’s the world of financial principles.

Whether you’re a trader or not, there are core principles in trading that can ensure a trader’s success and if applied to real life scenarios, it can also help you accomplish a lot in those areas as well.

Control Your Emotions

This is by far the most important principle in trading and coincidentally in everyday life. While emotions are absolutely necessary for human interaction, connection and fulfilment; they need to be controlled. In trading, the two emotions that traders need to be aware of are FEAR and GREED.

Fear is essential to our survival however if not kept in check it can also lead to our downfall. If you’re trading and see that you’re losing, fear can kick in and cause you to do something rash that could make the situation worse.

This is the same in real life. Often times fear is a perceived threat rather than an actual one and because of our lack of control and understanding of the perceived threat, we make rash decisions thus making the situation worse.

When faced with fear, it’s best to calm down. Relax and assess the situation before acting so that your actions are not something you later regret.

The other emotion, greed is also detrimental to traders. This is because when a trader gets greedy, they are blinded to their mistakes and the possibility of messing up so they hold onto a position too long and end up losing more than if they had opted out earlier.

In both cases, it’s good to have a plan or strategy in place so that you can minimize rash actions and reduce the negative consequences that are a result of those actions.

Trading Psychology

These two emotions fall under what is known as Trading Psychology. It’s the mindset and thought patterns of traders. It is without a doubt a very important matter that every trader must understand in order to increase their chances of success.

You can learn more about Trading Psychology as well as successful strategies used by renowned traders by clicking here to check best forex books on the market right now.

Among the best, we highly recommend you read the Complete Trading for a Living by Alexander Elder. It’s the true definition of “old but gold.” While it doesn’t give you specific information on trading online because it hasn’t been updated since 1992, it has sound principles on trading psychology, money management and more and is renowned among top traders.

As mentioned before, this knowledge cannot only help you increase your trading success but also be applied and help you improve your everyday life.

After all, sometimes the answers we seek is where we least expect to find them.