How to develop a strong trading mindset

Author: Giles Coghlan | Category: Education

A strong frame of mind


We have already established that trading is stressful (as if we needed persuading), so now let's look at some strategies for helping us to deal with stress. We all need stress to motivate us, so we don't want to avoid all stress. We just want to be able to cope well with stress

When we have a losing run or a heavy loss the first reaction we have is a combination of disbelief and anger. It is an emotional response. Now, we don't want to just repress these emotions. They drive our behaviour and can cause us to react. Sometimes we might want to jump straight back into the market to 'get back our losses'. We look for the first half set-up we see, price is at a weekly support so we put in a buy, or price has spiked 40 points on the EUR/USD we jump in. This is almost entirely an emotional response. As we have seen this is the fight or flight part of our brain in operation as we are in a panic mode. We are angry, emotional and in this state we are highly vulnerable to making poor decisions. Perhaps, we could lose months of hard earned profit in a 'moment of madness'. Except, it is not madness, it is just an emotional reaction and it is understandable. So, the first step in dealing with this is to recognise when you are in this state. Virtually all traders will recognise this state and be able to share stories of how this has affected them. You need to move out of the emotional state of mind into the acceptance mindset. Let the loss sink in, accept it, and now you are ready to move on. Here are 5  tips to help you develop  a better frame of mind.

 Tip 1

Record your thoughts and feelings at the end of each day. What are you thinking and how you are feeling? Perhaps you had a heavy losing or winning trade? Write down how you are feeling. This action itself is a helpful mental exercise to help deal with some of these emotions.


Tip 2

Accept that a losing trade or a losing run is temporary. Furthermore, realise that you can change it. Even If you have never been profitable as a trader, you can change that. Trading is teachable, like any skill. Like riding a bike, at first you fell off, but then you got it licked. 


Tip 3

When you are in a very negative state of mind, which you will tend towards during a losing streak, try to look at some of the things that are positive for you. What are your strengths? Your positives? What things can you control?


Tip 4

Get some rest. If you don't rest, you will burn out. Are you getting enough recovery time? Make sure that you factor recovery into your day. This is recovery for the nervous system, so a gym session is not the answer here. You want to have a definite rest : Sleep, or a time of quiet. Perhaps try some breathing techniques. Allow yourself a break. Why not break in between trading sessions? Don't just hammer at it for 12-15 hours straight. Your performance will suffer and your energy will flag. Get a decent night's sleep too. Rest will help your performance. Make sure you take holidays.


Tip 5

One of the worst things I find about trading is that it is a lonely pursuit. `I love people, teamwork and banter.  Sat at the terminal, little people contact and it can become a sealed little world. 99% of the people in your life can't relate to trading and either think you are a hero or a villain and then a lot of the correspondence you have is one way. So, get a support network if you don't have one. Could you pair up with someone else in a performance activity and compare notes? Is there a top-level sports person you could meet with and talk about your performance and state of mind with. What about meeting up with some of your online trading acquaintances?  Is there a local meet-up you could arrange in your city?


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