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Top skill you need to develop as a trader

Top skill you need to develop as a trader

I receive a lot of emails these days, from people from different walks of life who are either starting their journey as traders or who have been at it for a couple of years without having experienced any kind of major success. And so, the question that I often get is this…

What are the top mental skills I need to possess to thrive in this field?”

Now, one could go on and enumerate a number of mental skills new and/or struggling traders need to learn (patience, resilience, diligence, etc., etc.), or one could take the easy and straight to the point route and talk directly about thoughts. In my opinion, this is more effective because everything starts there, so, in some sense, by talking about thoughts, one is articulating the source of all problems and their antidote.

In today’s post, I want to share a passage from my book, The Essence Of Trading Psychology and it really sums up why you need to start working on thought awareness.

I hope you enjoy it.


Thoughts are predominant aspects of the human experience. Everything we’ve discussed so far, from fears and expectations to fixed beliefs and goal-oriented focus, all of these attributes manifest themselves through thought, and this drives emotions, behavior, and the subsequent sets of thought. It’s a never ending loop and an engine where the off-switch is practically non-existent.

What caused me to look deeper into the nature of my thoughts is my own inability to manufacture consistency in my trading results, despite having a promising trading methodology.

I couldn’t get myself to do what I knew I should do for the sake of my long-term results because of the constant afflicting thoughts and emotions that were driving my behavior. In that sense, I was a prisoner of my own mind.

I spent my time:

► Creating excuses for why I couldn’t follow my methodology, and I almost always I placed the blame on something or someone other than myself. Actually, this was my forte!

► Wishing I had what others have, resenting them for their successes, and repudiating the reality of my life.

► Finding problems everywhere instead of opportunities.

► Doing everything I could to avoid the pain of being wrong.

► Dreading things that were out of my control for fear of having to go through failure.

► Giving priority to short-term emotional gratification instead of privileging my longer-term goals.

These pervasive habits defined who I was because I was identifying with the stories my minds created. This generated stress and anxiety, exacerbated my fears, and made me miserable in and out of the markets. And I didn’t know there was an alternative to that.


Stuck in a cage wide open

I think it’s interesting and somewhat encouraging to know that our own experiences of our minds are no different than the minds of others. We’re all plagued with the same thought processes – the patterns and habitual tendencies are inherently the same.

One day, I unintentionally realized the insubstantiality of my limiting thoughts. I began seeing that I was, in essence, held hostage by my own thinking. The sheer automaticity of my thoughts (just not being able to stop the inner conversation) became intriguing to me, so much that I began spending more and more time in isolation, whether through special retreats or solo expeditions in the wilderness, all in a quest to discover more about the happenings in my mind.

Eventually, through a simple practice which entails sitting and paying strategically attention to the breath, I began seeing substantial changes in the way I perceived things. In these moments of fresh look, the empty nature of thought became more and more apparent to me. This is not to say that I was able to control thought – and that is not the point. What started happening is that I began accepting my thoughts, seeing them as they arise, and witnessing their passing without judgment and completely free of prejudice or preconceived perceptions.


Thoughts: nonsolid and transient appearances in consciousness

This ability to see thoughts as nonsolid, transient appearances, and notice them as they arise, as opposed to being captured by them, has been the all-important difference since it has helped me engineer consistent trading results year after year. And these changes did not only pertain to the markets, they also affected my personal life in major ways.


What is a thought? No one really knows, but the point of this question is not to come up with an answer. It is to direct the mind to look into the very nature of thought – not the content, what it’s saying, but what the thought is as a phenomenon.

This simple introspection exercise is something very few people do in their lives. Mostly, we are just lost in the stories of our thoughts and we take the content to be all too important. That is why we make trading so hard and challenging when it shouldn’t be the case. You don’t lose sleep over a game of Monopoly, do you? (I hope you don’t). Yet, with trading, we are so involved in the stories our mind creates around it that it becomes practically impossible to perform from a detached and impartial standpoint.

What is startling is just how much power unnoticed thoughts have over us. For instance, we might be watching an unfolding move in the markets, and in a moment, the mind decides to hop on a train of association to thoughts and emotions. We don’t know we’re on this train and we only realize it in hindsight – after a costly trading mistake born of this association.


Realizing the empty nature of thought

Thoughts are like little bullies in the mind, and they dictate behavior. “Go here… go there”, “Do this, do that”, “You’re not good enough.. you’ll never be good enough”, “Are you stupid? Don’t enter this trade, you’ll wind up losing again”… It’s just an endless barrage of opinions, judgments, comments, and they run our trading and our lives when they are left unchecked. But as soon as we pay attention to their nature, we see that they are a little more than nothing. They are pretty much insubstantial, empty, and illusory. One moment they are here, and the next they’re gone.

Thoughts are like clouds, they have no tangible reality or intrinsic existence at all. There is, therefore, no logical reason why thoughts should have so much power over us. There shouldn’t be any reason why you should be enslaved by them.

When we recognize the emptiness of thoughts, the mind no longer has the power to deceive us. But as long as we take its content all too seriously, and as long as we think of our deluded thoughts as real, they will continue to torment us mercilessly, and trading under those conditions can only be a losing game.

There is tremendous space and openness when we are not enslaved by our inner conditions. So cultivating an awareness of our thoughts, I think, is the most important exercise a trader can do as he ventures in his journey to profitability.


I hope you liked that passage and found it useful. If you want to read the book, you can get it here

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I've been trading for a living since 2006. By merging mindfulness (an in-depth study of the mind and its tendencies in the present moment), a good trading process, and an efficient business practice, I went from being a losing trader to a consistently profitable one. Through my work here at Trading Composure, I aim at helping you do the same.
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