We are entering a new year that seems to be one many are feeling more optimistic about but yet cautious at the same time. It appears that the Fed will start raising interest rates. And, there now appears to be growth in the economy. As we enter a new year, we now have choices as to how we will approach the months ahead. Now is the time for us to enter a trading mindset. This will motivate us to work hard and do what is necessary to take advantage of the trading opportunities that are out there and become winners.
It is unfortunate, however, that many of us are not ready to adopt to this type of trading mindset. We may not have the confidence we need to achieve our goals. Some of us may see a great opportunity. But because we aren’t sure of ourselves, we make mistakes and wind up losing on a trade. When we experience a loss or a series of losses, it is not uncommon to start questioning our skills and become full of regret. If we aren’t ready to seize good opportunities, there is no way we will ever succeed.
Now, there are some of us that have experienced losses and were able to shake them off. What is it that makes one person lose their confidence after a setback and another forge ahead without being fazed? It all boils down to how we perceive the situation. If we take setbacks in stride, we will be able to understand our failures. Even if we had a failure, this will not be a reflection of who we are as a person. We know that the markets are unpredictable and sometimes things are not going to go according to plan not matter what we do.
On the other hand, there are those of us that feel that failures in the market are an indication that we are incompetent. While this isn’t always a correct assumption, it will impact the decisions and outcomes we experience. Often, these negative thoughts about our abilities are not even conscious thoughts. These are what Dr. David Burns, author of the book “Feeling Good”, calls “automatic thoughts”. Let’s look at an example of how this works. If the market doesn’t work in our favour, we would automatically think that our incompetence has been exposed and we will not have a chance of being profitable. The more we think this about ourselves, the more likely it will become a reality. Our thoughts become self-fulfilling prophecies and even the smallest mistake will throw us off track.
Now, the question is, what do we do about this self-sabotaging behaviour? According to Dr. Burns, one way to combat these automatic thoughts is to write them down as soon as we realize we are having them. This will give us the chance to analyse and then challenge them until we can see that they aren’t true after all. For instance, let’s say we have experienced a setback. We end up telling ourselves that this shows how inept we are and that we should get out of trading. However, now that we have written this down, we can examine this more closely. Is this thought really accurate?
When looking at this with a different trading mindset, we will recognise that all traders experience setbacks at some point in their career. And this is expected. By thinking this is something that rarely happens in trading, we are making the event more significant than it really is and that there must be something wrong with us rather than there being other factors at play.
In most instances, setbacks can be attributed to unfavourable market conditions. Or perhaps, it is that we are lacking the experience to deal with specific market conditions. However, that lack of experience does not mean we are so incompetent that we should get out of trading because we are not “natural born traders”. In fact, there is no such thing as a “natural born trader”.
Many would argue that there are no areas in life were someone is a “natural born” anything. Once such person is the philosopher, John Locke who put forth the idea that we are born as “blank slates”. The truth is, if we put in the time and effort, we can learn to do anything. We can be profitable in the market even if we aren’t masters. It is simply not true that we need to be a master trader to make money. Thinking this will only lead to more negative and self-defeating thoughts.
None of us have the ability to predict the future, but it is a new year with new opportunities. Putting a stop to those negative “automatic thoughts” and putting in the time and effort needed to become profitable is essential. Positive thinking goes a long way towards becoming a good trader.