What separates the winning traders from the losers?
It’s not their accomplishments, which are just symptoms, after all. It’s the way they think.
Here are 7 deadly thought habit of the unprofitable trader.
1. I will be happy once I finally become a consistently profitable trader.
If you think you can’t be happy until you’ve reached a certain outcome or place, then, it seems to me that you’ll never be happy because that goal will always be elusive.
Markets are uncertain, this is a fact. And if your well-being depends on the ups and downs in your PnL, your mood will always be swinging like a pendulum.
This is not the optimal way to approach trading.
Happiness doesn’t have to be some special state that you want to get to eventually. It doesn’t have to be contingent upon anything (especially not the markets) or anyone other than yourself at this very moment.
Happiness is always available to you, and in each and every moment you are making a choice to let yourself inhabit it or not. It is always present, regardless of who you are, what you have (or don’t have), and where you are. You just have to learn to tune in to it.
You can begin to do that by learning to count your blessings, in and out of the markets, and seeing the positives in your situation – whatever that is.
This is also called perspective. You prevent your mind from lingering too much on the short-term picture and you try to keep it focused on the larger one.
Looking into the nature of your thoughts and feelings is the next step. Try cultivating a meditation practice. It’ll help you see how insubstantial your thoughts can be.
When you allow yourself to be happy, moment after moment, paradoxically, you increase your chances of success in trading because you’re not resisting anything. You learn not to believe all the stories in your mind, and so, you become open to everything, ready for anything. You’re at ease and peaceful with whatever comes your way.
2. I lost money this year. This other guy on twitter seems to banking money all the time. His strategy must be superior.
The trades and the kinds of return some people post on their twitter feed is sometimes just astonishing. It looks like they’ve got it all figured out. When you see that, especially if your results are so-so in comparison, the mind has this tendency to compare.
You might have been satisfied with your results earlier, but as you see theirs, yours seem more and more insignificant. So you begin to criticize yourself and your performance. In doing so, you also repudiate your own accomplishments.
Let’s be clear, many of these trades are bogus and those traders are intellectually dishonest — they’re scammers and frauds, and they want you to think that they are doing great because they have an agenda.
So, they either post their winners only or they delete their tweets that display losing trades whenever they see fit.
Alternatively, they might not even trade at all and the trades they post might just be phony.
And in the rare case that these traders are actually genuine, while you could investigate their methods out of curiosity, it is also important to note that different strategies will perform differently in different market conditions.
In other words, your strategy might be perfectly fine, it’s just that it’s not performing well in this specific market condition. And when the time comes, maybe yours will perform better. And the other traders’ strategies, not so much.
Of course, this is just an assumption. You should investigate your own strategy’s past performance before you even begin trading it. That way there can be no doubt in your mind. You can then know if the strategy is at fault, or if it’s you — the operator.
But above all, what’s important to note is that it’s completely useless for you to compare yourself to others.
If you took somebody else’s strengths and compared them to your weaknesses, how do you think you would size up? And do you think this would make you feel good?
But, this is what most of us do— and a lot of us do it pretty often. Comparison is almost always based on conjectures. The reality is that our strengths and weaknesses are all different and, based on that, no matter how you look at it, there will always be someone better than you, if you look hard enough.
But you know what? It’s okay! If we were all the same, we’d be robots right out of a production line. But we’re not… so my suggestion is that you have to learn to trust yourself, the progress you’ve made, and where you are on Y O U R path, with Y O U R strategy!
You do that by looking at where you were, and where you are now. How much progress have you made? What are your accomplishments? Your successes, however small? What have you learned so far? You get the point, the only person you should be comparing yourself to is the guy (or gal) you see in the mirror!
3. I can’t stop compulsive trading errors. I’m a failure!
This is a recurring problem and one that I address quite often on this blog. You get locked in compulsive patterns of behavior, and you don’t even know how to stop.
You’ve tried everything!
I, too, have failed so many times. I wouldn’t be able to count all my failures if you asked me— and I certainly continue to fail from time to time…
I go through trading losses. Quite often actually.
And I fail at other things too.
Yes, I am human!
Does that make me a failure, though? You see, one important lesson I’ve learned throughout my 10+ years of trading the markets is that failure is not the opposite of success, it is part of it!
Trading is all about failing. Yup, it’s about failing and getting back up. If you don’t fail, you don’t learn. If you don’t learn, you can change!
Of course, this is a short answer. But inherently, it’s simple as that.
So you want to do well in this field, you have to learn to lose with grace.
Don’t ever let a string of losses convince you that you actually A R E the failure!
No, you’re not. You just had an experience that didn’t yield an immediate favorable outcome.
What can you do about it?
If learning is your answer, you’re onto something…
My suggestion is to start documenting your failures each day, week, or months. And then, come back later to see if you’ve improved upon them.
4. So many ‘fake-outs’ these days… those high-frequency traders are messing up everything.
When you intellectualize the market’s every move, you begin to see problems everywhere. The truth is that you can’t know for sure why a certain market moved the way it did. You can have an opinion, and even speculate on where it’s going to go next. Whether you’re right or wrong, it’s still a conjecture because nobody knows for sure.
And it’s useless to assert things like that based on insufficient evidence. It’s also stressful and completely unproductive because it feeds your expectations for the future. And as we know, the future never exactly pans out the way we think it will.
Relax, sit back, and acknowledge that you don’t know… and you don’t need to know. Let go of trying to control things that are simply out of your control. Just work on executing your proven trading system (the one thing you DO have control over). Eventually, your results will come in line with its capabilities for that specific market.
5. I won’t take this signal. if I place this trade, I will lose again… just like last time.
Again, this mode of thinking rests on the assumption that you know what will happen next. Your minds will automatically associate what is happening in this very moment with something that is in your brain as a memory.
And this causes you to perceive things in the present in a skewed way, leading you to think that you know what is going to happen next – even though you don’t.
6. The market gaped down below my stop. Why do these things always happen to me?
Even though we might have good things happening all the time in our lives, our minds tend to give more weight to the few bad things that happen. This is a basic cognitive bias called the negative effect.
And here’s the thing: Good things happen to everyone. And so too with bad things. But, dwelling on the bad things is usually what makes things worse than they are…
Shit happens, but suffering is always optional! Pain (emotional and/or physical) is a part of the human condition. But it passes – it always does. Meanwhile, don’t let it hold you back.
Learn to see bad things as a part of the experience, the journey. Since “bad things” are really only opportunities for growth, don’t forget to learn from them. Don’t let them cause you to lose focus on your objectives – which is to follow your plan, regardless of good or bad circumstances.
As dramatic as they might look, don’t get concerned too much with single events. Focus on the long-term picture and look forward towards something good in your future if you stay disciplined.
7. I don’t have enough discipline…
Discipline is not the issue. For me, desire, resilience, and focus is everything, and discipline is only a by-product of those three. And it’s something that can be worked upon.
Negative thinking like this will always hinder your capacity to accomplishing anything – just like a self-fulfilling prophecy. If you don’t think you can do something, you probably won’t. And this is especially true in trading.
Turn your thinking around. You can do this! Don’t put your focus on discipline – and the lack thereof. Seek within yourself and see if you have the desire and the focus necessary to make trading something worthy of your time. If yes, you will be able to go through trading’s rough patches, and along the way, you’ll develop discipline. If no, you won’t. Simple as that!
It might take you more or less time, depending on multitudes of factors like your capacity to learn, self-regulate, etc… but you will find ways to make yourself a success at your goal. If you fail, you learn, and you try again. That’s the key!
Those were the seven typical habits of thought that usually prevent the typical trader from venturing into profitable territory.
There’s certainly more to be said and I tackle that in these two post: