When you’re trading the markets it’s necessary to concentrate on the trade. You cannot let your attention sway. You can’t impulsively make a mistake. We are often distracted, however, and when we are distracted, we act impulsively and make mistakes.
Research studies have shown that when people’s psychological resources are taxed to the limit, they have trouble resisting temptation. For example, when they play games of chance, they are likely to take an immediate smaller reward rather than wait for a larger reward. It’s like your mind tells you unconsciously to avoid waiting and to just get it over with and take what you can get. But winning trades are hard to come by and if you sell prematurely too often, you’ll never accumulate enough profits to end up profitable overall.
Rather than allow yourself to get distracted, it’s vital to focus on the moment.
Focus on the process of trading in the here-and-now. When you are fully engaged in trading and concentrating on your ongoing experience, you increase your odds of entering “the zone,” a peak performance mental state where everything seems to naturally come together.
In this peak performance mental state, you are not worried about past mistakes or future profits. All your attention and energy are focused on the current trade. You are more in touch with your instincts. You see the markets more clearly, and are intensely aware of your feelings, sensibilities, and judgments. You can review a multitude of details, and can effortlessly identify the key factors that are likely to drive market action. Moving into this higher level of awareness during a trade can greatly increase your chances of success.
You may not need to be focused on your trades at every moment during the trading day, but there are specific times when full concentration is vital. At these times, it’s essential to trade at your best, and take decisive action. You can’t flinch. You can’t hesitate, and you can’t make a mistake.
At the moment you enter or exit a trade, for example, you must be ready to devote all your psychological energy to the trade. Don’t take it lightly. It’s easy to become distracted and make a trading error.
How can you increase your chances of trading in a focused, peak performance mindset?
First, maximize your chances that you will be alert and ready to concentrate. Don’t trade while hungry or tired. It may not show, but when you are tired or hungry, you may be a little on edge, and you may have difficulty concentrating. No one has an endless supply of psychological resources; the mind has limits. When you are tired or hungry, you have few resources to concentrate fully.
Second, don’t underestimate the influence of background stress. Family hassles, chores you have to complete, and similar stresses and strains that take up space in the back of your mind may deplete psychological resources without you knowing it. Get rid of as much stress as possible. Third, it’s also useful to trade modestly. The more you risk, the easier it is to lose concentration as you secretly worry about what you will do should you lose money that you just can’t afford to lose.
Risk management frees up psychological resources in ways that are not always apparent. It’s just one more way to reduce the strain on your mind and allow you to trade more freely and creatively.
When you have put on a trade, it’s essential to stay focused on monitoring it. You must be able to accurately perceive the signals that indicate the market is going against you, and you must act expediently to protect yourself.
When you are tired or stressed, however, you may lose focus. You may have trouble effortlessly executing your trading plan, managing your trade, or exiting at the best time. Take precautions to make sure that your mind is in top mental shape. When you are rested, free, and ready for the market action, you increase your chances of trading like a winner.