Since getting in to trading more than 15 years ago I have seen a whole industry has emerged called “The Psychology of Trading”. I have found it fascinating that traders feel they need special psychological advice. I mean why not? There’s Adult Psychologists, Child Psychologists, Marriage Counselors, Family Therapists, why shouldn’t traders have their own special category?
I can tell you why not. Because there’s nothing special about traders. They’re just people and people are creatures of habit. There’s a saying that says “You are what you do repeatedly”. Folks, success is a HABIT. It’s not just one thing, it’s a series of things strung together that produce positive results. Until you learn to act in your own best interest, there’s not much anyone can do. If you want to be successful here’s a few things you can do.
1) DECIDE! The word decide comes from the Latin “Decidere” meaning “To Cut Off From”. To decide means to cut off all other possibilities. When you decide to become a successful trader you have cut off the possibility of failure. You have committed yourself 100%.
2) Take a look at your trading and your results. More than likely the bulk of your trading losses come from one of two things. You either were impatient and therefor undisciplined in following your rules, OR….you simply took trades that were not part of your methodology. I call those “impulse trades”. You just took it because you thought the market was going higher, lower, sideways, up to res, down to sup, it does not matter because you just flat out went off the reservation!
3) Have a solid but simple trading plan. A good trading plan only has to be one page. Make it clear and concise. Make it simple to follow. Then FOLLOW your PLAN!
You see the REAL psychology of trading is the study of self control. It’s all about self governing and holding yourself accountable. That’s the bottom line. You break your rules and what happens? Besides losses….NOTHING! You take impulse trades and what happens? Besides losses….NOTHING again! To be a truly successful trader you are going to have to master self control. Master discipline and patience, and hold yourself accountable for your trading and your actions.
What does that really mean? Patience is simply a matter of waiting for the proper conditions to be met based on your rules. WAITING is what we get paid to do. The better you are at waiting the more money you will make. Discipline is a matter of ONLY taking those trades that follow your rules. If you wait for the proper setup, wait for the conditions to be met, and DO NOT take any other trades outside of the method while you are waiting, you can’t help but be successful. It’s a game of probabilities then. It’s making sure the odds are in your favor before you pull the trigger.
Most traders are not patient and when impatience strikes so does lack of discipline, and your find yourself in trades you never dreamed possible after you were stopped out.
Successful traders have created the HABITS of trading success by cultivating patience and discipline. They will wait all day if that is what their method calls for no matter how much they want to click the mouse. They wait, and wait, and wait some more. And as I always say….”Patience is Rewarded!”
In summary: Trading success is a result of doing specific things on a consistent basis. It’s creating the habits of success. It’s also a result of doing nothing while you wait for those specific conditions to be met. Success in trading, like any other career requires the cultivation of patience, discipline, and planning. There are no shortcuts to trading success. The biggest challenge you will face is controlling your emotions and your behavior. When you keep your emotions under control, then controlling your actions will be easier. When you can control your actions, keep from taking impulse trades, or breaking your rules, your trading will turn around.
Good Trading…….JC
