![]() Learn more about technical analysis with IG Academy's range of online courses. This is where you would set the parameters of your order and allow an algorithm to analyse the market and respond to opportunities as they arise. If you aren't confident in your ability to stick to your pre-made decisions, you could consider automating your trading strategy. If you choose to use fundamental analysis you'll evaluate macroeconomic data, company financial reports and the news to establish how and when to trade. Popular technical analysis tools include Fibonacci retracements, moving averages and Bollinger bands. The data they give off is then used to establish entry and exit points, and where to place stops and limits. If you focus on technical analysis, you'll use indicators to study signals and trends. This enables you to identify suitable entry and exit points before you start trading and ensures that your decisions have a solid foundation in historical data and trends, rather than 'gut feeling'. The best way to become decisive is to create a suitable trading strategy that outlines what you will need to see in your technical and fundamental analysis before you open a trade. Although it is important to act quickly, it is also important to make sure you have taken all the available information into account to give yourself the best chance of making rational decisions. However, research by Gollwitzer showed that ill-informed decisions can lead to excessive risk, because they cause a disparity between a plan and its execution 1. ![]() What does 'decisiveness' mean in trading?ĭecisiveness in trading is the ability to identify opportunities and act efficiently – this includes making decisions about when to enter and exit trades, assimilating new information into a plan and learning from mistakes.Īccording IG's survey, 27% of investors 'go with their gut' when making decisions about money. 1Pastor and Veronesi, 2009 Related articles Practise trading in a risk-free environment with an IG demo account. 1 How can traders become rational?Ī common way to improve rational decision-making is through a demo account, which enables you to practise trading and test your strategy without risking any capital.Ī demo account can help you to familiarise yourself with market dynamics so that when you start to trade using your own money, you won't be overwhelmed by feelings of fear – enabling you to trade in a more rational way. Rational decisions aim to maximise an advantage, while minimising any losses.Īlthough rationality is all about seeking the optimal outcome, studies have been quick to point out that this doesn't always mean making money – a rational decision can involve minimising losses and even accepting a loss. ![]() Rationality in trading is the ability to make choices that will result in the best possible outcome given the information available.
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