Trader Mindset: The Calm and Strategic Trader

You can never plan the future by the past

– Edmund Burke

Methodology and mindset are keys to successful trading as much as financial resources, a trading strategy that works and risk management in place. The methodology of using a strategy that has a proven track record combined with a sensible risk management policy that ensures that only limited percentages of capital are put on to any given trade are sensible and quantifiable.

Clearly defining the level of financial commitment and building in the expectation of losses helps get the correct approach in place for any given trade. This helps set up the other side of successful trading, namely mindset.

The nature of trading is that it is all about probabilities and working with the odds but this means that there is a downside. There is always the possibility of the odds going against you no matter how much you have analyzed, reviewed and considered. Events occur, companies make unexpected announcements and the markets go against you and you have a losing trade.

The question is always what you do about it and how you react to it more than why or how it occurred as the temptation is to go into self-doubt and be annoyed with yourself. However given nature of the markets you have to avoid taking it personally as this is the downside of playing the probability game.

It is all too easy to take a setback personally. Hindsight is a wonderful thing and easily applied to the markets where you question why you didn’t spot this, or think of that or plan for the other. Is it a short step then to question one’s own abilities overall and declare yourself as being incapable as a trader.

Is this true though? Is this a fair assessment of the situation?

The name given to this mindset is “helpless prone” and it recognizes the temptation to be pessimistic and negative when something occurs that goes against our plan or desires. However in order to trade profitably, it is essential to avoid such internalization and look to ensuring you have a robust plan that starts and ends with the presumption that you can trade profitably overall and it’s a question of putting the right things in place to be a successful trader.

After all, the main thing about being a trader is that whilst there are literally millions of other people trading for their own purposes, they are just part of ‘the markets’. What you need to focus on is yourself and ‘the markets’ and if you are trading your own account, you don’t even have the distractions or annoyances of bosses, supervisors or customers, you have total control of how you manage your accounts and what you do or don’t trade.

Such independence means that you can fall into the trap of making losses personal and focus on failures, but the fact is that you should accept they will happen and move on. It’s all part of the bonus of being in control.

What strategy you choose, putting in place adequate risk management and being sensible with how you approach identifying opportunities are all in your control. Your mindset needs to be one of self-belief and acknowledgement that trading profitably is all about percentages and therefore there will be downs as well as ups.

To presume to control everything will make you “helpless prone” and that will bring with it the greater risk of negativity, and susceptibility to self-doubt, neither of which are good trader mindsets. What you need to do is ensure that at all times, especially in times of losses, you remain calm and focused and never forget your trading strategy.

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