Developing the Trader Mindset.....
There have been hoards of information written on this subject and how to develop your trader mindset. The way I see it is you can throw most of it in the garbage because it will not help you if you don't master the basics and more importantly master yourself.
How many times have you heard from traders I see a great trade entry and I watch it unfold wishing that I had entered into the trade as it moves powerfully in my direction. Perhaps you have heard the one that you enter a trade only to exit with a loss where the price reverses and then heads in your direction.
There are a number of stories and phrases like these and I am sure just about every trader has experienced them on some level. I know that I have.
That being said, I didn't really start to grasp the market until I had control of my emotions and more importantly developed a patience for the market itself to provide the opportunities that were high probability trades.
You see it doesn't really some down to how much you are right or how much you are wrong. What it comes down to (as George Soros famously says) is "how much you make when you are right and how much you lose when you are wrong".
There are two or three important factors that helped me take an impartial view on the market. One was using position size and leverage properly. In short I mastered my risk management so that I could stay in the game regardless of my account size.
The second part of the equation is "when to take the trade". Most of the year the market is stuck in a range and does not really provide any real opportunity for the retail trader. It is these times that most traders get baited into trading where their accounts get depleted to the point to when the markets do make a true move they miss it because they are out of the game.
Lastly I think a good dose of patience and perseverance is important. Trading is a tough mental game. We all want the market to move quickly in our direction so that we can book profits for whatever our motivation is behind the profits. Unfortunately this rarely happens and we end up chasing the market all over.
I will tell you a story when I was younger because it related very much to what you will go through in trading.
When I was 18 years old I was canoeing on a Lake. It was early in the spring and the air was still very cool. The water was still only about 55 degrees so it was cold.
As I was making my way along I was paddling fast as it was a calm night and I wanted to see how fast that I could make the canoe go. The stars were out and it was a calm as glass. I was flying along and having a lot of enjoyment as the air was crisp and the night was truly beautiful.
Suddenly my paddle turned awkwardly in the water and I was thrown off balance. The canoe lurched to the side I was paddling and promptly flipped over, sending me into the cold water. I came up quickly (as I was a good swimmer) and quickly tried to climb onto the over turned canoe. If you have ever tried to get on top of an overturned canoe you will know the fallacy of trying to do this as it simply cannot be done. I kept slipping off and I began to feel frantic that I was going to freeze to death in the water. To complicate matters I was a long way from the shore ling (about a kilometer).
Then suddenly I stopped myself. The survivor in me took over and quieted the panicking child. I remember telling myself, "stop this nonsense now, you can't climb up on the canoe. Turn the canoe over and get in it (even though it was filled with water) and paddle in the canoe towards shore".
So calmly I turned the canoe back over, got in it (remembering to leave my wet cloths on as they would still provide some warmth as my body warmed the water) and began to paddle towards the shoreline. I remembered that you were not supposed to leave the overturned vessel and I remembered that this was the best thing to do. Rather than waste my remaining energy on trying to do nothing but climb back on top of the canoe I decided to fight for my survival. I remember thinking that even if I succumb to hypothermia at least they will find my body in the canoe.
I kept paddling looking at the shoreline getting closer and closer. Determination kept me going and perseverance. My body was cold and my muscles were sore. However I kept them moving and kept my energy directed to my only hope for survival. The shore kept getting closer and I felt myself getting stronger not weaker. Unfortunately I had lost the paddle in the night when the boat turned over and couldn't find it.
I kept paddling the canoe and me to the shore.
When I got there I remember standing in the shallows and thanking the lord. Even though it was a deserted piece of shore I at least made land.
I got my cold muscles to continue to work and dumped the water out of the boat, got back in it and paddled with my hands back to camp, never straying too far from shore this time.
Well I got there and chopped the wood to make a fire and dried out before heading to bed in my tent. The worst thing that happened is a got a cold from that weekend.
However I could have died.
So why am I telling you this story?
I am telling you this because until you get the survival mindset you will perish in this game. The survival mindset comes from persistence and having a plan to follow. Although it may seem like it is insurmountable I assure you it is not. Follow it and stick to it.
I hope that this helps.
How many times have you heard from traders I see a great trade entry and I watch it unfold wishing that I had entered into the trade as it moves powerfully in my direction. Perhaps you have heard the one that you enter a trade only to exit with a loss where the price reverses and then heads in your direction.
There are a number of stories and phrases like these and I am sure just about every trader has experienced them on some level. I know that I have.
That being said, I didn't really start to grasp the market until I had control of my emotions and more importantly developed a patience for the market itself to provide the opportunities that were high probability trades.
You see it doesn't really some down to how much you are right or how much you are wrong. What it comes down to (as George Soros famously says) is "how much you make when you are right and how much you lose when you are wrong".
There are two or three important factors that helped me take an impartial view on the market. One was using position size and leverage properly. In short I mastered my risk management so that I could stay in the game regardless of my account size.
The second part of the equation is "when to take the trade". Most of the year the market is stuck in a range and does not really provide any real opportunity for the retail trader. It is these times that most traders get baited into trading where their accounts get depleted to the point to when the markets do make a true move they miss it because they are out of the game.
Lastly I think a good dose of patience and perseverance is important. Trading is a tough mental game. We all want the market to move quickly in our direction so that we can book profits for whatever our motivation is behind the profits. Unfortunately this rarely happens and we end up chasing the market all over.
I will tell you a story when I was younger because it related very much to what you will go through in trading.
When I was 18 years old I was canoeing on a Lake. It was early in the spring and the air was still very cool. The water was still only about 55 degrees so it was cold.
As I was making my way along I was paddling fast as it was a calm night and I wanted to see how fast that I could make the canoe go. The stars were out and it was a calm as glass. I was flying along and having a lot of enjoyment as the air was crisp and the night was truly beautiful.
Suddenly my paddle turned awkwardly in the water and I was thrown off balance. The canoe lurched to the side I was paddling and promptly flipped over, sending me into the cold water. I came up quickly (as I was a good swimmer) and quickly tried to climb onto the over turned canoe. If you have ever tried to get on top of an overturned canoe you will know the fallacy of trying to do this as it simply cannot be done. I kept slipping off and I began to feel frantic that I was going to freeze to death in the water. To complicate matters I was a long way from the shore ling (about a kilometer).
Then suddenly I stopped myself. The survivor in me took over and quieted the panicking child. I remember telling myself, "stop this nonsense now, you can't climb up on the canoe. Turn the canoe over and get in it (even though it was filled with water) and paddle in the canoe towards shore".
So calmly I turned the canoe back over, got in it (remembering to leave my wet cloths on as they would still provide some warmth as my body warmed the water) and began to paddle towards the shoreline. I remembered that you were not supposed to leave the overturned vessel and I remembered that this was the best thing to do. Rather than waste my remaining energy on trying to do nothing but climb back on top of the canoe I decided to fight for my survival. I remember thinking that even if I succumb to hypothermia at least they will find my body in the canoe.
I kept paddling looking at the shoreline getting closer and closer. Determination kept me going and perseverance. My body was cold and my muscles were sore. However I kept them moving and kept my energy directed to my only hope for survival. The shore kept getting closer and I felt myself getting stronger not weaker. Unfortunately I had lost the paddle in the night when the boat turned over and couldn't find it.
I kept paddling the canoe and me to the shore.
When I got there I remember standing in the shallows and thanking the lord. Even though it was a deserted piece of shore I at least made land.
I got my cold muscles to continue to work and dumped the water out of the boat, got back in it and paddled with my hands back to camp, never straying too far from shore this time.
Well I got there and chopped the wood to make a fire and dried out before heading to bed in my tent. The worst thing that happened is a got a cold from that weekend.
However I could have died.
So why am I telling you this story?
I am telling you this because until you get the survival mindset you will perish in this game. The survival mindset comes from persistence and having a plan to follow. Although it may seem like it is insurmountable I assure you it is not. Follow it and stick to it.
I hope that this helps.
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