Trading in financial markets isn’t just about buying and selling things; it’s also about understanding how our minds work. Successful traders know that feelings, biases, and how we think are big parts of making decisions and what happens in the market.
In this article, we delve into the mindset of a trader, exploring what kind of mindset someone needs in order to be successful in trading. If you don’t train yourself to adapt to these mindset, you won’t last long in this field.
I won’t go into too much detail about psychological facts in this article because they’re a bit advanced and not quite suitable for this piece. You’ll learn about them in future articles. This article is mainly about understanding the mindset someone needs to have to become a trader.
Mindset of a Trader for Trading Success
1. Love Taking Losses
Trading involves both making profits and facing losses. Having a strategy with a 100% win rate is impossible. Any successful strategy includes winning and losing trades.
With a good strategy, you can aim for a 65% success rate and a 35% failure rate in trades. This means aiming to win 65 trades out of 100 while losing 35 trades out of 100.
A successful trading strategy must consider the possibility of losing trades.
Successful traders handle losses easily, knowing that there might be days where all their trades result in losses. They understand it’s part of their strategy, expecting a certain percentage of losses according to their plan. They accept such days as normal and don’t dwell on them.
In trading, experiencing both wins and losses is a mathematical reality.
“At the end of the day, you are paid to take losses, you are not paid to take wins, taking wins is easy anybody can do it. you are getting paid to do what other people cant do easily which is taking losses.” – Mohsen Hassan
2. Always Testing New Strategies
Successful traders are always trying out new things, always testing different ideas.
While successful traders mainly use their profitable strategy, known as their “Bread and Butter,” they also explore other methods. However, they don’t use these new strategies or variations on a large scale. Instead, they try them out with a smaller amount of money, which they call “Gravy Strategies.”
So these traders have a main strategy, their “bread and butter,” which makes them a lot of money. Besides that, they have several “gravy strategies” that act as extra approaches.
This is important because sometimes the main strategy doesn’t work well anymore, but one of the gravy strategies makes more money. In those cases, traders switch their main strategy with the successful gravy strategy.
They don’t completely test new strategies; sometimes they test the same strategies with different changes.
It’s really important to try new things, test different approaches to stay successful in trading.
3. Focus on Strategy not Money
“Money is an outcome of your performance.”
If you only focus on making money, you won’t succeed. But if you focus on being great at your business, money will come eventually. It’s the same in trading; if you focus solely on making money, you might end up doing things you shouldn’t. But if you concentrate on using strategies and trading correctly, money will naturally follow as a result of your good trading.
Successful traders always prioritize running their strategy as efficiently as possible. They don’t worry too much about how much money they’re making because they understand that if they execute their strategy correctly, money will come.
They take losses when necessary, let trades run according to their strategy, and play the game as correctly as they can.
Some YouTubers claim they stop trading for the day once they reach a specific target, but this idea can be misleading.
The amount of money you make shouldn’t dictate your trading strategy. Regardless of monetary gains, you should stick to your strategy diligently and stay in your position if it aligns with your strategy’s guidelines. Similarly, if your strategy signals it’s time to exit a trade, it’s crucial to act accordingly.
Focus on your strategy and let it guide your actions, so money doesn’t influence what you’re doing.
Developing a Mindset of a Trader
1. Emotional Discipline:
Successful traders cultivate emotional discipline to remain calm and rational amid market volatility and uncertainty. They acknowledge their emotions but do not let them dictate their trading decisions, instead relying on a well-defined trading plan and risk management strategy.
2. Adaptability:
Markets are dynamic and ever-changing, requiring traders to adapt to evolving conditions and adjust their strategies accordingly. Successful traders remain flexible and open-minded, willing to learn from both successes and failures to refine their approach over time.
3. Patience and Persistence:
Trading success does not happen overnight; it requires patience, perseverance, and continuous learning. Successful traders understand that setbacks are inevitable but view them as valuable learning opportunities rather than failures.
4. Focus on Process, Not Outcome:
Just like we talked above, While profits are the ultimate goal, successful traders prioritize the process over the outcome. They focus on executing their trading plan with discipline and consistency, knowing that consistent execution will lead to long-term success, regardless of individual trade outcomes.
Managing Psychological Challenges
1. Mindfulness and Self-Awareness:
Practicing mindfulness techniques and fostering self-awareness can help traders recognize their emotions, thoughts, and biases as they arise, enabling them to make more informed and rational decisions.
2. Seeking Support:
Trading can be a solitary endeavor, but seeking support from mentors, peers, or trading communities can provide valuable insights, accountability, and emotional support during challenging times.
3. Taking Breaks:
It’s essential for traders to take regular breaks to recharge and maintain mental well-being. Stepping away from the screens, engaging in hobbies, or spending time with loved ones can help alleviate stress and prevent burnout.
4. Continuous Learning:
Successful traders are lifelong learners, committed to expanding their knowledge and skills through books, courses, seminars, and real-world experience. Continuous learning not only enhances trading proficiency but also fosters adaptability and resilience in the face of market changes.
Conclusion
To sum up, having the right mindset is super important for succeeding in trading. This means being okay with losses, trying out new strategies while sticking to what works, and focusing on strategy more than just making money. Successful traders follow these principles, and by doing so, they can handle market challenges and move closer to reaching their trading goals.