Stock Trading is an Inside Job
We all know traders who spend every waking trading day staring at banks of
monitors, own every trading book on the planet, preach to us about multifarious
technical indicators until our eyes glaze over, and literally eat, breathe and
sleep the financial markets.
Still, when it comes right down to it, they may not make more money as other
traders who-while taking the markets extremely seriously–execute their trades
from a laptop on the dining room table and think relative strength has something
to do with weight benches and sweaty dumbbells.
Truth is … about 10% of our trading success comes from our trading and
market knowledge, our ability to put it into action, and the proper computer
equipment and trading programs.
The other 90-percent of our trading victories comes from the way we approach
the markets … our feelings that direct our actions, or call it the eighteen
inch connection between our head and our hearts. (Yes, our hearts “believe”
Ever heard the saying “I believe with all my heart”?).
Three methods you can use enhance your approach to the market and improve
your mind-set are 1) eliminate “right” and “wrong” from your trading vocabulary,
2) check out your internal belief systems, and 3) strive to stay positive and
proactive throughout the trading day.
Eliminate “Right” and “Wrong” From Your Vocabulary
It sounds funny, but it’s true: one big step you can make toward trading
success is eliminate “right” and “wrong” from your trading vocabulary.
If you plan your trade carefully before you enter each position, then follow
your risk management plan–if the trade goes against you and you are stopped
out-you are not “wrong” The market simply moves in a different direction than
your set of possibilities and probabilities indicate. Your loss is a business
loss. It’s part of the game. Shrug it off.
If, however, you insist on beating yourself up for being “wrong,” it will
color your perception of the markets. Then, the next time a good trading
opportunity presents itself, you may avoid a really good play out of fear of
“being wrong,” again.
On the flip side, say your trade hands you a huge gain. Boasting loudly to
yourself and friends that you were massively “right” can infuse you with a
cockiness that leads to a downfall. Suddenly, you feel invincible! You start
entering sloppy set-ups and getting sloppier with your protective stops. You end
up losing all of your profits, and then some.
Instead of dwelling on “right” and “wrong,” dwell on executing precisely
planned trades, then executing those trades with a calm confidence born of your
discipline, knowledge and experience. I promise, if you trade with skill and
discipline, the money will follow.
Check Out Your Internal Belief Systems
Every time we study a chart and then click on a “buy” or “sell” button, the
decision we made had to first run through the gamut of our thought associations
and belief personal systems. These associations and systems act as our mental
filters.
Our mental filters are woven from the threads of a lifetime of feelings and
experiences. While they are designed to keep us from harm (don’t touch the
fire), some filters actually limit our success at trading. Negative mental
beliefs–most of which we aren’t even aware of holding – can act as cogs in our
personal operating systems. These beliefs can limit decisions and the nimble
mindset so necessary to trading mastery.
Take an hour or two one day this week, and go to a quiet place where you can
be alone. Ask your self some revealing questions:
Do you really believe that you deserve to make money-and maybe lots of it?
Or are you unwittingly harboring old lectures from authority figures in your
youth that sound something like “You’re so lazy, you’ll never make any money”?
That deep-seated belief system can sabotage the shiniest trading career.
Do you sub-consciously believe “the love of all money is the root of all
evil”? Most of us grew up with that old saying. While money certainly doesn’t
assure happiness, the truth is, prosperity is a good thing. It not only allows
us to experience the best life has to offer, it also provides us with the
opportunity to share with others and improve their lives.
False, worn-out belief systems can haunt us into adulthood, run deep under
our personal self-image and seep into our trading decisions. You’ll trade better
and make more money if you take the time to drag yours into the sunlight,
examine them, and then send them packing.
Stay Positive and Proactive
Each trading day, your goal is to settle at your desk and approach the
financial markets with positive and proactive objectivity. Think like this:
Strive to observe and interact with the market as it truly is, not as you
wish it were.
Assume feelings of calmness and confidence; you should feel no pressure to do
anything except follow your plan.
When the market gives you a signal to act according to your plan, you execute
the trade quickly and calmly.
Once in a trade, you focus on managing your risk; you know that protecting
your capital is always your primary goal.
You stay proactive throughout the day; with your trading plan in place-you
can take whatever scenario the market sends your way.
Maybe you don’t have a bank of monitors to trade from, maybe you haven’t read
every trading book written, and perhaps you think relative strength has
something to do with your Uncle Fred–who really can bench-press more than some
younger guys.
Even so, if you can eliminate “right” and “wrong” from your trading
vocabulary, keep your internal belief systems free of limiting thoughts, and
approach each trading day with a positive, proactive mindset born of discipline
and a well-thought out good trading plan, you’ll definitely make good progress
on the road that leads to trading success.
Toni Turner is a trader and investor with seventeen years of experience in
the financial markets. She is the best-selling author of “A Beginner’s Guide to
Day Trading Online, 2nd Edition, A Beginner’s Guide to Short Term Trading and
Short-Term Trading in the New Stock Market”
You can find more how-to and educational articles to improve your investing
and trading each day on TradingMarkets.com.