9 Tips to Trading Without Emotion, Part 2

In the first part of this series on trading psychology, Markus Heitkoetter discussed the first three of his rules to becoming one of the only 11.5% of successful traders by limiting the emotional factor in your trading decisions. You can read part 1 of "9 Tips to Trading Without Emotion" by clicking here.

#4 Be Patient

Successful traders have patience. They know that most positions will not be profitable the minute they are opened. It takes time for a market to increase, or to move at all. You should never expect a position to jump right before your eyes.

Besides, remember that focusing on a particular trade is not your main goal. If you are serious about establishing a long-term strategy for consistent success, any one trade is only a small part of an overall plan. It's the plan that you want to be successful. Of course it's nice when each trade goes well, but if it's not because of your system, you haven't learned anything you can repeat in the future.

Also keep in mind that successful traders do not overtrade. They realize that doing so puts their account at risk, and they know that not every day is a day for trading. They wait for high probability opportunities. Expecting too much out of any one trade, or even out of any one day, can cause you to overtrade. You may find yourself wanting to see immediate success, and when you take more trades, it at least makes you feel more active. But if you aren't acting according to the strategies you devised for yourself in your planning sessions, you are destroying all the work you've done. Even if the extra trades are profitable, you haven't really learned anything that can contribute to a consistently successful trading career. You've only gotten lucky.

Wait for situations that meet your criteria. See yourself as carrying out a program, not as grabbing for any little profit you can at the moment. Remember that no one trade is as important as establishing a trend of success across your entire portfolio. And creating that trend will take time and patience.

If you can integrate these insights into your own psychological mindset, you'll gain a significant edge in the market. I can't stress this enough: the right mindset is one of the keys to investment success, and most traders fail to understand this.

#5 Adapt to Current Market Conditions

Successful traders realize that nothing is 100% foolproof. They trust in their indicators, but they are aware of other factors that may influence their trades. Consequently, they stay open to new ideas, to other people's experiences, and to experimentation.

Since your goal as a trader is to constantly revise your strategy to be more consistently profitable, you must always think of your plan as a work in progress. Every win and every loss gives you more data to revise your techniques. But you should never think of yourself as having found the one and only way to trade. Instead, consider yourself as building a toolbox with different tools for different situations. Not every tool will work every time, and you may have to find new tools for new developments in the market. You should never depend too heavily on any one technique.

Successful traders have the ability to adapt. They adjust their trading methods and decisions to account for changing market conditions. This is so important. Becoming a successful trader requires that you understand how to react when the market fluctuates, which it will. After all, you only make money when there is an upward or downward trend. Change in the market is necessary to your success.

Many traders fail when they refuse to try new strategies for fear of losing money. They get stuck with a very small toolbox and, if they are unwilling to change, they will soon find that their methods for generating profit no longer fit the market's recent habits. Part of the problem here is fear of risk. But those afraid of risk should not be trading in the first place. Successful traders look at new risks as opportunities to learn how a certain strategy works. In the worst case, they know not to try that technique again, but in the best case, they increase their ability to react to market changes. Whether the individual trade is a profit or loss, the trader has learned something valuable.

If you can integrate these insights into your own psychological mindset, you'll gain a significant edge in the market. I can't stress this enough: the right mindset is one of the keys to investment success, and most traders fail to understand this.

#6 Focus on Being Consistent

Successful traders know that success means consistency, more than it means immediate profits. Of course traders want to make money, but to do that consistently, you may have to learn by dealing with setbacks and unimpressive gains. The trick is not only to make money off of trades but to learn WHY you made that money. And if you simply get lucky now and then, you haven't learned anything you can turn into a consistent strategy of success over a career, or even a lifetime, of day trading.

That's why successful traders bank on consistent profits. They know that ignoring the small-profit trades and angling for a "grand slam" is a sure way to lose money. No one can repeatedly predict huge gains on any one trade. But many people can and do predict a host of small-profit trades that create the same, if not more, profit than people who get extremely lucky once or twice.

Besides, you know that your system is working well if you can almost always profit, even on a small scale. You know you're working in the right direction, and only have to revise your plan to increase profits rather than starting over completely. Someone who depends on making a "grand slam" does not have that same insight and is essentially just gambling.

For that reason, it is vital to understand that successful traders recognize that a "good" trade has nothing to do with profits or losses. Evaluate your trades on whether or not they followed your trading plan to the letter. Even if you do lose money, as long as you stick to your plan, you have made a "good" trade. At the end of the week or month (or whenever you reevaluate your strategy), you can look at profits and losses, but you will also be looking at overall trends. And tweaking trends rather than reacting to individual trades is much more likely to help you develop a consistently profitable trading career.

If you can integrate these insights into your own psychological mindset, you'll gain a significant edge in the market. I can't stress this enough: the right mindset is one of the keys to investment success, and most traders fail to understand this.

Markus Heitkoetter is CEO of Rockwell Trading, Inc. He has been trading for 19 years and has developed numerous trading systems along the way. He has spent the last 5 years teaching his strategies and methods to hundreds of traders worldwide, offering seminars for clients including the CME, Eurex, FxStreet, and Strategy Runner.