- Managing your risk, you will not be around to win if you do not control your risk per trade. How many losses in a row can you survive? Surviving the market is magic at times.
- Trading a consistent methodology is magical because you will be consistent enough to make money when a market environment rolls around that it works in, single trades by themselves mean nothing outside the context of a method.
- Trading a methodology you believe in will enable you to trade it through draw downs instead of giving up.
- Understanding your edge will enable you to have the mental toughness to trade knowing eventually you will get the pay off.
- Trading price action versus your own opinion will help you magically be on the side of the majority most the time.
- Trading in the direction of the trend will enable you to be right more times than wrong most of the time.
- Cutting losses short and letting winners run will make you profitable. Now that is the magic of asymmetry.
- Only trading in markets and trading vehicles you understand will keep you safe from many big mistakes.
- Doing nothing when you do not know what to do is a plan that will save you much money.
- Spending thousands of hours studying charts, reading books from successful traders, and doing the right homework will make you successful eventually so all your friends can tell yo how lucky you are. Then you can tell them that is isn’t magic, trading is a lot of hard work.
Archives of “mental toughness” tag
rss10 Minute Toughness
If you’re looking for a simple program to develop the mental skills necessary to be a successful trader, then check out 10 Minute Toughness – The Mental Training Program for Winning Before the Game Begins. Jason Selk works with many of the worlds top athletes to develop the mental toughness needed for sports success and his program translates perfectly to trading. I’ve been working with the book for a few months now -its easy to read, easy to implement and the program is excellent! As the book says “No psychobabble, no self-help cliches, no touchy feely theories. 10 Minute Toughness is the simple and effective mental-training program to help you get focused, stay on target and find a competitive edge.” The program contains short impactful exercises to help you
- calm your heart-rate and maintain a relaxed state of mind
- stay focused on the aspects of your trading that will most help you succeed
- build confidence
- perform mental run-throughs that prepare you for the market day
What I particularly find helpful is the emphasis on process goals. Many of us focus on goal setting in terms of performance goals like making so many points a week. A process goal shifts the focus to concentrate on the specific aspects of trading that will help you achieve the performance you are looking for. It helps you keep your attention each day on the one or two things that will improved your trading. The book is very consistent with what Brett Steenbarger teaches and yet somehow I found it more accessible and easy to implement. The detailed examples of top athletes, baseball, basketball and football players makes the book fun to read and easy to get. This book will make a great addition to every traders library
Weakest Part of Trading
The weakest part of any trading method is the trader themselves. There are many, many, robust trading systems and methods that do make money in the long term. The problem is the trader having the discipline and mental toughness to trade one of them consistently. The vast majority of time it is not a system failure but traders that fail in this game through one of seven common errors. If you can understand these error and overcome them you could make a lot of money in the right market conditions.
- The trader must have the discipline to take the system’s entries and exits.
- The trader must have the discipline to take the stop loss on a losing trade when it is hit and not keep holding and start hoping.
- No matter the method the trader has to manage risk through proper position sizing, getting greedy and trading too big will blow up even the best systems.
- It is the trader that must have the perseverance to stick to the method even during losing periods, and also stick with trading until success is reached.
- If a trader can not manage their mind then the stress will break them, I have seen this happen many times. If you can’t handle losing you can’t trade.
- The trader must find a robust method, must understand why it has an edge, and must believe in their methodology.
- The trader has to know themselves and trade the method that fits their risk tolerance levels and own psychology.
The good news is that if none of these error fit you when you lose money in a trade then the market was just not conducive to your methodology, and it is not your fault so don’t dwell on it.
Recommended Books for Traders
As Jesse Livermore said: “Trading is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or for the get-rich-quick adventurer.” In other words, to excel in the stock market, you have to work hard, have emotional control, and develop confidence in your strategy. I constantly get asked to recommend books that can help with these areas of trading. There are so many good ones out there, but here are a few that I suggest.
(If you click on the titles, you can get a more detailed description from Amazon.com).
How to Make Money in Stocks (4th Edition), William O’Neil
How to Trade in Stocks, Jesse Livermore
Reminiscences of a Stock Operator, Edwin Lefevre
The Disciplined Trader, Mark Douglas
Trading in the Zone, Mark Douglas
Trader Vic-Methods of a Wall Street Master, Victor Sperandeo
Trader Vic II-Principles of Professional Speculation, Victor Sperandeo
How I Made $2,000,000 in the Stock Market, Nicolas Darvas
The Battle for Investment Survival, Gerald Loeb
Confessions of a Street Addict, James Cramer
There are 3 Market Wizards books all written by Jack Schwager:
Market Wizards
The New Market Wizards
Stock Market Wizards
Confidence and emotional control are extremely important in order to become a successful trader. I believe the ideas taught in the following “self-help” books can help develop that “mental toughness” that’s needed. The concepts learned can also be applied to many areas of our lives:
Think and Grow Rich, Napoleon Hill
You’ll See It When You Believe It, Dr. Wayne Dyer
The Power of Positive Thinking, Norman Vincent Peale
The Magic of Thinking Big, David Schwartz
Awaken the Giant Within, Anthony Robbins
Tips For Mental Toughness of trading psychology
| Here are three things you can do to keep your mind and body focused on the trading: 1. Be aware of what is going on in your mind, body and feelings. Slipping into an internal focus seems automatic because we aren’t fully aware of it as it is happening. Being aware of what the mind is saying and how we are feeling is the first important step in mental toughness. You can catch yourself before things spiral out of control. 2. Know what trading actions are important to take. These are high-value actions (HVAs) under the trader’s control. HVAs are relevant to trading and include identifying sound trade setups and solid entry triggers. You must know these cold and be ready to execute them. 3. Commit to high value actions regardless of how you feel. This means being willing to accept unwanted thoughts and feelings because trading well is more important than feeling good. Maintaining an external focus and initiating positive trading actions may not be easy when feeling down, but it’s certainly not impossible. Like all skills, it takes practice. |
7 Weakest Points of Trading
The weakest part of any trading method is the trader themselves. There are many, many, robust trading systems and methods that do make money in the long term. The problem is the trader having the discipline and mental toughness to trade one of them consistently. The vast majority of time it is not a system failure but traders that fail in this game through one of seven common errors. If you can understand these error and overcome them you could make a lot of money in the right market conditions.
- The trader must have the discipline to take the system’s entries and exits.
- The trader must have the discipline to take the stop loss on a losing trade when it is hit and not keep holding and start hoping.
- No matter the method the trader has to manage risk through proper position sizing, getting greedy and trading too big will blow up even the best systems.
- It is the trader that must have the perseverance to stick to the method even during losing periods, and also stick with trading until success is reached.
- If a trader can not manage their mind then the stress will break them, I have seen this happen many times. If you can’t handle losing you can’t trade.
- The trader must find a robust method, must understand why it has an edge, and must believe in their methodology.
- The trader has to know themselves and trade the method that fits their risk tolerance levels and own psychology. (more…)
Tips For Mental Toughness of trading psychology
| 1. Be aware of what is going on in your mind, body and feelings. Slipping into an internal focus seems automatic because we aren’t fully aware of it as it is happening. Being aware of what the mind is saying and how we are feeling is the first important step in mental toughness. You can catch yourself before things spiral out of control. 2. Know what trading actions are important to take. These are high-value actions (HVAs) under the trader’s control. HVAs are relevant to trading and include identifying sound trade setups and solid entry triggers. You must know these cold and be ready to execute them. 3. Commit to high value actions regardless of how you feel. This means being willing to accept unwanted thoughts and feelings because trading well is more important than feeling good. Maintaining an external focus and initiating positive trading actions may not be easy when feeling down, but it’s certainly not impossible. Like all skills, it takes practice. |
Mental Toughness
You must eliminate “Human Emotion” as much as possible in this business. It is paramount to success. Unless you are adapt at predicting the future, your mind is a far weaker ally than all the tools in your toolbox.
Using a Star Wars analogy: the Jedi were superior in mind control and were able to play tricks with weaker minds. Humans are emotional bunches who are not fully prepared for the forex market.
Really once you overcome fear, self-doubt, emotions, and attachment to money you, will be on your way to long term success. Depending on how much power those words have over you, will determine amount of time needed to develop needed skills for growth.
Remember you will learn how to control fear, self-doubt, emotions, and attachment to money as those are human emotions buried inside each of us since birth. Abundance is our birthright, yet many never reach full potential. (more…)