If you study the markets, it would behove you to review instances of mass psychology in everyday life. Of all the creatures that have ever walked upon the face of the Earth, Homo Sapiens (humans) are by far the most intelligent.
In spite of our intelligence, there are instances where we mere mortals put aside all individual reason and creativity in lieu of the effortless alternative, following the group.
Don't Follow the Masses
Either due to not thinking of a reasonable alternative or believing that since everyone is doing it, it must be the correct course of action, we often "do as the others do" instead of investing our energies into developing our unique intuitions derived from our personal experiences. However, when we view ourselves as just another face in the crowd, we often act irrationally or impulsively.
A fitting example would be to view how some people behave when stuck in a traffic jam. Instead of patiently waiting for the speed to pick up, they become somewhat unglued and zip into one lane and then the other trying to make up for lost time. Knowing that their efforts are fruitless, they continue in their vain and unreasonable attempt to get nowhere fast!
This phenomenon is also demonstrated by the actions of those driving on a busy intersection. Knowing there is no possibility to complete the turn after the light turns green; there is always that individual who will irrationally go forward anyway; further adding to everyone’s misery by blocking traffic going in the opposite direction as well.
This mass psychology phenomenon is witnessed not only in everyday life, but also in the trade arena. Many will be driven by an internal urge to sell when the majority of others sell and buy when most buy. This is a closed minded, rigid and inflexible way of both thinking and conducting one’s life. To become an intuitive, successful trader of means, it is crucial to remain flexible and open-minded. Resist the urge to follow the masses!
Trying to Bring Order to Chaos; an Impossible Feat
Many fear the unknown and following the crowd is a "safe" option to striking out on their own. The world can be a pretty frightening place and it is human nature to want to bring order to chaos. In our quest for order, we often close off our minds to our own innate creativity and intuition. This rigid inflexible way of thinking is a hindrance to those in the trades market. These qualities are crucial for a trader to advance from novice to a successful, intuitive professional.
Take Managed Risks
What is one recipe for success? How can you become relaxed and unafraid of your creativity? First, learn how to manage and take carefully calculated risks. Fear brings about rigidity and if you make a trade with money that you don't have (and cannot lose) you will become stressed and inflexible. Take smaller risks at the beginning to feel at ease in the markets.
Relax, Don't Take Losses Personally
Second, develop a relaxed, laid back attitude. Remember, that regardless the outcome of any one trade, do not take it personally. This does not dictate your self worth or your future success as a trader. Personally detach yourself from the market as much as possible. This will free up your emotional reserves to both learn about and enjoy the trading process. When you are wrapped up in your emotions, it is difficult to spot trading opportunities as you are focused inward instead of outward. Relax, as stress inhibits creativity. You may also find that you are able to trade intuitively because you are at ease.
Acknowledge Your Limitations
Finally, you must acknowledge that you have limitations. Do not set your standards too high as the fall would be swifter and the damage greater than starting out slowly and working your way up the trades' ladder. You cannot "force" yourself onto the market as it does as it wishes and it cannot be controlled. Feeling the need to control often leads to rigidity. Being rigid inhibits your overall creativity, which is an essential quality needed to become a successful trader. By accepting that you have only so much control over situations and circumstances along with realizing your personal limitations, would enable you to trade more creatively and intuitively. This will ultimately lead to increased profitability.