Trading Psychology II
This is the sequel to Trading Psychology I. Here are more insights and simple rules of thumb, as you seek to make your fortune in the world’s markets!
1. Get out when wrong!
Recognising when you are wrong can be both painful and humbling. It is also one of the most important skills that you should learn in order to become successful. If the market is random, we must accept that we will be proven wrong many, many times. As long as you don’t stubbornly stick to losing and often illogical positions, you will be a long way down the path to success.
Remember: trading is about having a higher number of winning trades versus losing trades – not whether you are always right, or even mainly right.
2. Learn the style or system that is best for you and execute it
If you have gone through a logical and intelligent process to arrive at a particular trading strategy or system, there is no point when you then get a signal or entry...to not take it. Entering a trade should not be a daunting experience. If you have been alerted to a trade, what many traders can do at the start of their career, or when on a losing run, is to second guess the trade. This just adds to the stress of beating the market.
If you have a system, you should execute the trades; if you are not happy with the system…change it. Once you can do this you will find your trading and trade process is actually much more harmonious. A calmer trader makes for a better trader.
3. Visualise the financial opportunities
Being a trader is about many things. But what draws most people in, are of course the financial rewards. Look at the lists of the world’s most wealthy people and you will see many of them earned their money in either finance or trading. The potential rewards are therefore obviously high, and that is something that should motivate you.
It is also important when sitting down at the start of the week to be free from having to set any targets or unrealistic goals; with a market that offers such huge potential you don’t need to say “I will earn 10% this month”. Simply follow your plan – the market will provide many opportunities. Don’t limit yourself!
4. Self analysis
Trading is in many ways one of the hardest pursuits you can attempt. Not surprising given the financial rewards and lifestyle that are on offer perhaps. It is therefore natural that you should self-analyse your approach and trading temperament. This is not a sign of weakness, in fact it is the opposite; to be truly successful in trading you must also analyse your setup, mindset and weaknesses. And it must be an ongoing process!
A good way to give you an objective view of yourself in terms of your trading is to keep a trading journal – where you write down comments on each trade you take to see how you are progressing and where your weaknesses lie.
5. Develop a winning mindset
Finally, trading is about winning. Therefore it is key that you have a winning mindset, not just (obviously) in your profits, but also your life outside of the markets. Keep a fit body and healthy mind and visualise how you see yourself in a few years’ time. A ‘can do’ attitude is vital! Enjoy & Good luck!