How we handle just a few key moments, from the planning stage to the execution of an investment/trade, can be the deciding factor in whether we will achieve our trading goals.
When planning a trade, it is vital to consider all potential events that may derail our plan. We must lay out a very specific blueprint for where we will enter and exit a trade and also decide what we will use as signals to monitor the trade.
Once the trade is executed, our mindset can be a useful tool in creating success. By maintaining a peak performance mindset, it will be difficult to fail.
However, it isn’t realistic to anticipate regularly achieving this state of mind without preparing for it. Without preparation, it is inevitable that a mistake will be made during one of those few key moments.
Trading success is dependant on our ability to maintain a high level of psychological energy.
That means taking care of ourselves and allowing enough time to rest and relax. Unfortunately, many of us have trouble doing that.
Research has backed this up. It seems that people don’t seem to have enough time to get an adequate amount of sleep.
Active investors and traders in particular, depending upon our location, can have a very difficult time getting those eight hours a night in. For example, those that live on the west coast of Australia, where the markets open early, are likely to skimp on sleep.
Plus, we all know what it is like to lay awake worrying about a trade.
It can be a challenge to get the proper amount of rest, but it is essential. Maintaining psychological energy is nearly impossible when we are tired and can’t seem to maintain focus.
We may think that we can manage on less sleep, but in truth, we become more irritable and tired and when that happens, we make decisions on impulse.
To be profitable, we must maintain discipline.
Discipline requires energy.
For example, we must be able to control our emotions. Most of us feel somewhat anxious or stressed when our money is at stake, but it is important to keep that in check if we want to achieve our goals.
One way to reduce stress is to use risk management. If there isn’t a large amount of money to be lost, keeping stress levels lower is doable.
However, most of us have that voice in the back of our minds telling us that we must make more on our winning trades than we lose on our losing trades. We also have the pressure of knowing that if we have a number of losing trades, it will be even more difficult to break even. It is simply impossible to not have these thoughts, but maintaining a positive mindset can minimise the stress.
Of course, staying positive in the face of adversity takes psychological energy and when we aren’t well-rested, it doesn’t take much to slip into a negative state of mind.
Self-control is necessary when planning and executing trades.
It requires us to focus and think clearly. We will have great difficulty with this process if we are feeling tired and it might even mean us giving up. Energy is necessary to maintain self-control and getting enough rest will amass the amount of energy we need to call upon when those pivotal moments of a trade present themselves.
Everyday life stresses also drains our stores of energy. It’s not possible to eliminate them, but how we handle them is under our control. We do have the ability to minimise some of the stress. For example, is it really necessary to engage in arguments about things we cannot change? That energy could be dedicated to our trades instead.
We should never discount the importance of maintaining psychological resources when it comes to trading success.
Self-control and focus are key factors in planning and executing trades successfully. However, it takes psychological energy and a positive mindset to sustain the characteristics necessary to become profitable. This means getting enough rest and relaxation so that we can build up our mental energy stores and make the best possible trading decisions.