We all know that working on our trading mindset will make us better traders, but where to start?
Developing a calm confident interaction with the markets is usually the result of a lot of work over a long period of time. Add this to the fact that a lot of advice on trading psychology is frustratingly vague or overly-academic, it’s no wonder that a lot of traders are put off making a start to consciously work on their trading mindset.
So, here are 4 things you can start to implement TODAY to set you on the right path towards greater clarity in your trading.
Read through any trading forum and you’ll be able to spot the beginner traders straight away. They are the ones who talk about slippage, stop hunting and thieving brokers all in the same sentence. Traders progress once they take responsibility for their trading decisions and put a stop to the victim complex.
You need to understand that you alone are responsible for your trading decisions. Stop blaming others (broker, tipster, the cat) and know that you make the choices and you press the button.
This is at once incredibly liberating and a bit scary, but fully embracing this fact is the start of the really valuable mindset work that is necessary to move towards trading success.
Start an honest trading journal
This took me a long time to take onboard and I’ve since realized that the things you are most resistant to are often exactly what you need. So, if you have been putting off starting a trading journal, or if you have dismissed the idea, grab a notebook or open up a new document and start one today.
Some journals just list the “numbers” of the trade i.e. entry, exit, risk, result, but that is not the most important information as far as mindset work goes. Describe the mechanics of the trade yes, but also include what you felt before, during and after the trade. Why did you make the decisions you did? What emotions did you feel? Any physical sensations?
A detailed journal builds up an incredibly useful insight into your trading mindset. You’ll start to build a picture of why you trade the way you do, you’ll start to spot recurring patterns and you’ll get to know what is really going on between your ears, so the sooner you start one the better.
Look after yourself
A good trading mindset does not stand alone. Humans are made up of complex inter-related systems, so any work you do on your physical and mental health will pay off in better trading.
How many traders put off working on their health, thinking they need to put in crazy hours for a few years and then once they’ve made it, they can then look after themselves? The truth is that putting off eating properly, getting good rest and ensuring you do regular exercise you enjoy is actually putting off the trading success you are working so hard for.
By looking after yourself now, you not only improve your quality of life and enjoy life more now, you also become a better trader because of it.
The beauty of this approach is that anything you do to look after your physical and mental health is “work” as far as your trading mindset goes. So no need to feel guilty, that massage is going to pay for itself many times over!
This can be a tricky one. We are tempted to add to our trading method all the time; look at more timeframes, add more indicators or search for more instruments. Getting bogged down with correlation had me running in mental circles for years.
Most of us are brought up to believe that more and more information is a good thing, but greater complexity does not necessarily equate to greater profits. In fact, the more complex your method, the more mental conflict you will experience.
The simpler your trading method, the easier it’ll be to access what is going on in your head when you trade. You’ll be able to cut through the noise and know for certain whether or not you traded according to your plan. And if not, why not.
Implementing these 4 things will help you start making meaningful inroads into developing a positive trading mindset.
This is key if you want to improve your trading results; it’s a fascinating journey and all the while you’ll get to know yourself better. You’ll be able to start to change the patterns that are preventing you from becoming a calmer, clearer, more focused and more disciplined trader.
Mindset work is the single most important factor in your trading success. You only need yourself and a willingness to make a start, and you can start today.
By Jools Elworthy