You Are What You Believe
Trading Wisdom
Beliefs of Successful Traders
1. The markets provide a constant stream of opportunities.
2. If I miss an opportunity, another one will soon follow.
3. If the position is stopped out, then I need to reconsider the trade.
4. I trade one trade at a time, and stay in the present moment.
5. I seek a standard of excellence, not perfection.
6. Losing small is part of my trading plan to maximize profits.
Beliefs of Unsuccessful Traders
1. I must trade every day.
2. If I lose on this trade, I feel like a loser.
3. I must catch today's hot stock, though my system gave no signal on it.
4. I am unlucky.
5. I can't afford to lose anything on this trade.
6. My broker gives me lousy fills.
7. When this loser gets back to even, I'll dump it.
Unsuccessful traders tend to live in a fantasy which says that the market is there to provide them with future riches and solve all their problems. They transfer these fantasies to the individual stocks that they buy and have difficulty coping with the reality of being wrong. When events don't live up to their hopes, they tend to ignore the situation. If a stock they purchased drops under their purchase price, they will not abandon the fantasy that the stock will make them money.
Such individuals may resort to extreme beliefs that they are right, that the market is wrong and that the loser stock is just out of favor temporarily and eventually everyone will catch on, the trader will be justified and the loser stock will rocket. This is self-deception and can be taken to the point of outright delusional thinking. The adage that the market can be wrong longer than you can remain solvent is totally true. The market is always right, no matter what. You are not stronger, better or greater than the market and you must respect that or you will wipe out.
As a trader you must morph from a fearful mindset to a psychological state of confidence. You must believe in yourself, and use a strategy that builds confidence by taking bigger profits and smaller losses. The toughest part is continuing to take trades after a string of losing trades, even if they are small. Psychologically, that's where many traders will give up, because they are usually too quick in equating consecutive small losers with system that is not working. What you may want to do is practice trading your system with what you consider a small amount of capital, where you care about the money but not so much that you will give up on the plan.
This is in contrast to paper trading, which will fine for starters when doing initial testing, but absolutely cannot even remotely simulate the psychological aspects of trading with real dollars. Your goal in this exercise is to take your system's trades, even through what may appear to be painful losing streaks. Just experience what it is like to keep trading through that drawdown and how good it feels to follow your rules through the good, the bad and the ugly days. IF you do this consistently day in and day out, you will instill in yourself a confidence you never knew you had. You will make yourself stronger and grow in your own conviction to your trading system.
You will foster both consistency and discipline as you progress through this exercise. You will know when it is time to move up to the real dollars you intend to commit, once your psyche is battle-tested through several drawdowns. As you hone and modify your trading system to take larger wins and smaller losses, you will gain more confidence and your self-esteem and courage will increase. If you become depressed, anxious, disgusted with yourself and give up, then you are a loser and you need to get a day job. Trading is not for the weak of heart, mind or spirit. It is for the strong, determined and courageous who will study and work and keep trying.
It is critical to transition from a mindset that stocks will make you rich to a mindset that your trading method will make you money. Being right or wrong on each individual trade does not matter. You have to be able to move through the adversity of losing trades and hold onto the faith that you will make money in the long run. This is why many individuals find it so difficult. People focus too much on the individual trades and hold unrealistic fantasies about them, while they cannot take responsibility for the decisions that go wrong. The worst traders take it personally, lapse into self-loathing, anger, slander against others and depression and give up. The best traders believe in themselves and their trading system and stay with it.
Trending123.com Support Team by Dr. Janice
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