Do not anticipate trouble, or worry about what may never happen. Keep in the sunlight.
– Benjamin Franklin
The markets are moving again, interest is increasing and with it opportunities but now is the time to remember that how you approach trading is what can make the difference. Focus and attention to detail are all important. Thoughtful, careful planning is essential but surprisingly enough so is a carefree attitude and relaxed manner.
Hard to understand on the face of it when you are talking about committing your own money and potentially losing it but on the flip side it is easy to understand that stress and anxiety cause judgement to be clouded and thought processes disturbed. Relaxed and carefree trades mean that the trader is able to concentrate better and get the bigger picture.
The issue is frequently when things turn against you and a loss occurs because at that point, it is all too easy to get lost in the whys and wherefores and start second guessing yourself. The successful trader is one that is relaxed enough about each trade, and that they don’t get stuck in the process but is able to keep moving forward.
So what is it that creates such a relaxed attitude to losing money? Well first off it comes down to always remembering that one trade is just a part of the whole and that the markets are all about probabilities with the guarantee that you will lose sometimes. So the essential element is risk management.
This means that no one trade should carry too great a risk or significance, so when starting out, the ideal is to limit each trade to around 0.5-1% of capital. Therefore if it fails to evolve into a profitable trade, the impact is minimal and easier to shrug off. When a trade takes on huge significance it is impossible to retain the required detachment to manage it when it goes wrong.
A trading strategy is what helps reduce risk as well but the fact is that at some point it will fail. Sometimes the failure is a one off, other times it is an indication that market conditions have changed so the strategy is no longer valid.
If you are in a relaxed and carefree frame of mind it is much easier to feel less emotionally attached to any given strategy and thus change it for another. The big picture should remain the same, to make profits overall so the requirement is to find something that works. If you have risk management squarely in mind, you will be able to weather a run of losses whilst establishing the successful trading strategy.
What do you do though when your strategy fails and you fail to cope?
Well first off go back to the big picture. The long term aim and put it into perspective. The successful trader remains relaxed and carefree as they are able to remain positive and don’t get caught up in thinking that every trade must deliver profits or that they need to double profits to make up for losses. One trade at a time, focus on that single trade and reduce expectations and you will be able to return to a clearer and more positive mind set.
It is easy to say that the trader who has already had success is going to find it easier to be a carefree trader when compared to the novice or those who have suffered a run of losses. However the fact is that it is in part this carefree attitude that generates the success. This is where the trader, novice or experienced, needs to ensure that they have look to make trading an activity they enjoy, that they trade for the fun of trading and not solely for the dollar return they expect to get.
This mind set can only occur if you are either so rich as to be able to lose money without thought or if you know you have a risk management strategy that ensures your financial survival. Then you can step back and tackle the mental challenge of identifying the best opportunities and strategy and seeing if you can apply it. Success should not then be seen as neither glory, nor loss as a statement of failure, but more an identification of what does or doesn’t work.
So to become the profitable trader try to ensure that you can become the carefree trader. Look at how you approach each trade and how much pressure you feel under and consider why you started trading. Aim to find the place where you have limited your risk enough to ensure you can just see each trade as a part of the big picture and critical to success or failure.
At first it may be difficult to step back and avoid the emotions but the more you see trading as an intellectual challenge, rather than purely as a money making machine, and enjoy the process, the easier it will be to move the mental mindset to match those successful traders.
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