Resetting Your Trading Business
We’ll take a look at what a trading mindset is all about and why it has such a large influence on your trading performance especially now that you’re back in the saddle.
I probably don’t need to remind you that trading the financial markets can be a tough journey, especially if you constantly feel that your mental energy is depleted and that leaves you with a difficult time focusing on the markets.
Separating your trading decisions from emotion takes a great amount of practice and discipline, which develops with experience.
Now that you are back resetting your trading business, If you want to master your mindset and take full advantage of the psychology behind trading, you are going to really have to focus.
Fortunately, there is an effective way to return the excitement that trading carries along – by improving your trading mindset.
What Is a Trading Mindset?
The markets have no emotions at all, so it’s completely up to the traders how they perceive the market to be.
If your goal in the long run is to attain and maintain the status of a trader, it’s very important to develop a mindset that helps you observe the market from an unemotional perspective. Your mindset will ultimately define your reactions during losing trades or large profits – will you be able to stay calm during these events and avoid reacting based on emotions?
This is what a well-rounded trading mindset is all about. A disciplined trader will never let emotions interfere with their trading decisions.
However, it takes much effort to achieve the status of a disciplined trader. You don’t become a professional overnight in any business, and trading is no different.
Why Is a Positive Mindset So Important?
As we already said, the market has no emotions at all. All emotions come from market participants, who are still predominantly humans. This is why chart patterns and strong accurate indicators along trend-following techniques work so great in trading.
However, you may have heard that 90% of traders lose 90% of their trading funds within 90 days. While this is predominately true, It’s important to ask yourself what are the main psychological traits that distinguish the remaining 10% of successful traders from the majority of other market players? All of them humans, but a small group of traders still succeeds to significantly outperform all other traders combined.
While it’s very unlikely that they have found the holy grail of trading, the truth is that one psychological trait comes very close to it – a trader’s mindset.
RESET #1 Research, Strategy & Ongoing Training
To start off on the right reset footing as a trader, you should build your knowledge of the market and industry and use it to create a plan you can stick to.
The more you research and strategize, the easier it will be to feel confident making moves based off that information, even if emotion starts to get in the way. Aim to base the majority of your decisions off this objective research and your trading plan alone.
There are 3 words that always ring true in the world of Real Estate, Location, Location, Location. Well, guess what in the world of Trading, 3 words always ring true, Training, Training, Training. The obvious point being you can never receive too much training, nor do the best traders ignore training. They all realize the value of being on a constant movement of growth in the trading field, through training.
These areas will help improve your decision-making process both in the long-term and when forced to make a call on the fly.
RESET #2 Don’t Let Losses Get Out of Control
You may have in the past, not really managed your trading losses. You possibly waited for a losing trade to become profitable again, as you did not want to close the trade in loss. As you can see, emotions are again interfering with rational trading decisions which can be very costly in the long run.
The following numbers shows how much return a trader has to make to return to their initial balance, after losing a certain percentage of their trading account:
The Lost Amount Necessary to Return to Your Initial Balance
10% – 11% 25% – 33% 50% – 100% 75% – 400% 90% – 1,000%
Instead, try to manage losing positions like a successful trader. If one of their trades is slightly in the minus, signaling that their trade setup isn’t playing out as expected, successful traders will close that trade and move on. They cut their losers short, and let their winners run. In the long run, this can make a real difference to your bottom line.
RESET #3 Keep a Trading Journal & Make Shifts
Another great way to attain a successful trader’s mindset is by keeping a trading journal.
Trading journals are just like regular diaries – only that they include the trades you make. Journals consist of journal entries, which can cover anything that you think might be important about a particular trade.
Standard journal entries include the currency pair, the crypto, the stock you traded. The reasons why you got into a trade, its entry and exit levels, and additional market commentaries.
Once you close your trade, develop the habit to update its journal entry by the trade’s profit or loss, and any additional comments which might give an insight into the performance of the trade.
Making regular journal entries can reveal a wealth of information about your common trading patterns that lead to losing trades. Maybe the majority of your pullback trades turned into losers?
Your trading journal will reveal a lot of room for growth that you would not be aware of, without your trading journal.
RESET #4 Watch Successful Traders
One of the best ways to learn a skill is by observing the actions of people who have already been down the road and mastered the skills necessary to trade.
Trading is no different from any other skill, and replicating the process and work routine of other successful traders can make miracles for your trading mindset.Finding a successful trading role model might be difficult, but fortunately, there are dozens of excellent books that you can pick to get an insight into the mindset of those traders.
Check out Amazon.com and other sites and type in Successful Traders. Another great book to move you in a traders healthy mindset is Stephen R. Covey’s “The 7 Habits of Highly Effective People.