So, you want to be a successful trader who makes money consistently in the markets? First, ask yourself this: Do you have a successful mind? You simply cannot achieve the former without first developing the latter.
Before we go any further, I want you to know that this isn’t another boring article about “trader psychology” or beating the dead-horse of “controlling your emotions in the market”. I know you already know the importance of those things, and if you don’t… then go read this article.
This lesson is about real-world mental thought processes that professional traders use to succeed not just in trading, but in life. I’m going to show you what pro traders think and how they act that allows them to achieve massive success in the markets.
We are going to go over specific thought processes and mental routines that you need to start practicing and mastering. I’m going to give you some exercises you can start working on today, to get real results. The key for you is going to be, sticking to them, religiously, day in and day out.
The primary divide between a newbie trader and a professional, is their trading mentality. In fact, the difference between successful people and those still struggling in any field or endeavor, is mentality.
To put it a bit more succinctly; if you want to fix your trading, you first need to fix your mind.
1. Learn to completely detach yourself from live trades
Perhaps the single most defining characteristic of a professional trader is the ability to mentally detach from live trades. Beginning and losing traders are not yet able to do this, hence they struggle.
Your goal is to literally feel nothing after you press that buy or sell button on a live trade. Once you get to this point, you stand a much better chance at making money in the markets because you will largely eliminate emotion-born trading mistakes.
Once A Trade Is Live, Avoid the Charts
Professional traders have learned that the easiest way to detach mentally from a live trade is to simply avoid the charts. After you place the trade, simply walk away; turn off your computer and leave it be until tomorrow at least.
Starring at the charts won’t help; you cannot control the market, you can only control yourself. It’s critical you let the trade play out without your involvement. In order for your trading edge to work, it needs to play out without you meddling with it, over a large sample size of trades.
Screen Watching Will Ruin You, Second Guessing
Watching the charts as your trade is live, just for amusement, is stupid. If that sounds harsh, it’s meant to be. There is no bigger trading mistake than watching live trades tick by for no good reason. It’s like being on a diet and purposely driving yourself to McDonald’s every day when you’re hungry and trying not to eat the food. It’s. Not. Going. To. Work.
You don’t need to feel the ups and downs of the market with a live trade on. You don’t need to and you shouldn’t want to. Save yourself the torture.
What happens when traders watch the screens all day with live trades? A number of things, but most commonly it results in second-guessing. You will second-guess your trade idea when price starts moving against you a little bit. You will second-guess your profit target as price moves up then pulls back against you a little bit. There are many other scenarios that result from watching charts too much. The bottom line is, if you want to mentally detach, you have to physically detach from the charts.
Your goal, in order to mentally detach from live trades, is to set the trade up and forget about it, just walk away.
How to do it:
The way you solve any type of trading problem is by making a conscious effort to change your trading routine and that will lead to new, positive trading habits.
- As with anything, simply removing the problem (the charts) can be a massive part of solving the problem. You have a problem with a person? Removing that person from your life usually solves the problem. Don’t communicate with them anymore. You have a problem over trading and making stupid trading mistakes? Remove yourself from the charts when you have a live trade on.
- Find a distraction, it can be an activity, a hobby, anything really. Just make it something you do every time you have a live trade on, so that you are building it into your trading routine to ultimately make it a habit.
- Another way to mentally detach is to make sure you have no way to access the charts during the day while you’re at work or school or wherever. Delete that trading app from your phone.
- Perhaps you could even have someone else manage the trade for you and you give them instructions on what to do and what not to do. The bottom line is that you need to have a plan for how you will purposely remove yourself from the charts after putting a trade on so that you can learn to mentally detach and start trading like a professional trader.
2. Start thinking of trading as a mental ‘war’
Your competition in the market is fierce. You are competing against players who are better capitalized, better educated and perhaps more intelligent than you.
However, you have one thing they may not; a sickening desire to be the best and to play the game with more discipline than them, because that is how you will beat them.
Imagine there’s a gun to your head as you’re trading and each click of the buy or sell button is literally a life or death decision. Sounds extreme maybe, but that is how serious you have to take this if you want to be in the top 10% of traders, you certainly aren’t going to get there by taking it lightly.
The point here is that you are competing against real people, it’s not just you and a computer screen and the charts, not at all. Trading should be thought of as the ultimate mental sport, a true battle of wits, if you will. You’re in the land of big boys, hedge fund managers, time to get your ‘war paint’ on and stop pretending this is some get rich quick Hollywood movie.
The opponent is the enemy and you are here to defeat them, you are literally trying to take their money. If you don’t think like this, I promise you won’t take it serious enough to maintain the consistent discipline required to win.
Don’t come unprepared:
Whatever you do, don’t show up to the battle unprepared. Many traders open their charts after funding their live accounts and they are literally like a solider showing up to fight a battle with a pocket knife.
If you don’t want to lose all your money in a week, you need to be 100% prepared for the mental test that is waiting every time you open your laptop and click on that Metatrader platform icon.
Important note: Whilst we are aiming to be prepared and extremely self-confident in our trading approach, we are not reckless or foolish. Being well prepared and confident is very different from taking stupid risks and being overly aggressive in the market. In fact, part of being prepared is understanding money management and having everything planned out before you push the buy or sell button.
We are not gambling or playing around, this is serious and we are ready to take on the competition in all areas: Mind, Method and Money management, the 3ms.
How to do it:
To master anything in life, you must learn, practice, repeat. Trading is no different. Except that in trading, there are many people online offering education and advice who perhaps aren’t the best to learn from.
I am probably the most competitive person you will ever met when it comes to trading, business and entrepreneurship. So, when it comes to conveying to you the mindset you need to succeed in the market, I am the man you want. Here are some tips on how to start viewing trading as a competition and how to prepare for it:
- View each trade as a negotiation, a deal. It’s a contract of sorts, so take it seriously and make sure you dot all the I’s and cross all the T’s. If you were sitting next to someone in a room and either you lose money or they lose money, you would be much more focused than you are just trading by yourself. Starting thinking of this as a competition where other people are trying to take your money. Do this, and you’ll naturally start focusing more on the important things like money management and being consistent in all aspects of your trading approach.
- Train and prepare. Does a boxer just show up to the boxing match without months of preparation and training? No, of course not, and if he did, he would be pummeled. You develop confidence through honing your skills and learning, mastering your craft.
- Stay motivated to stay on track. You have to work on this, at least initially. Motivation isn’t something only “lucky people” have. It’s a lifestyle, a mindset that you have to train yourself to achieve through reading and repetition of proper actions.
- Understand chart psychology what your opponent is doing and thinking. You can do this by learning to interpret the price action bar by bar, by following the footprint of money.
- Get yourself psyched up when you open your charts. You can do this by reading trading affirmations that you like. You can even use music or motivational videos on YouTube for this. I use to listen to Highway to the Danger Zone in my early days, every day before looking at the charts. I still do sometimes. It always gets me psyched for the “danger zone” of the market.
Bottom line; trading the market is basically a mental war. Think of it as such and treat is as such. If not, you will surely be defeated in battle.
3. Don’t let money make you ‘funny’.
Money screws with peoples’ minds. Whether you’re making it or losing it, there will probably be some psychological side effects that come with it. Professional traders know that to make money consistently they have to fix this problem. You want to fix your trading? You have to fix your money mindset.
The primary mental hurdles that face traders in regards to their money, are the following:
- Fear of loss, fear of missing out. Fear of loss causes traders to let small losses turn into big ones, because they are simply afraid of taking any loss. Fear of loss also can cause traders to be afraid to trade, letting good trades pass because they’re too afraid of a potential loss. Fear of missing out generally means you are chasing trades that you missed for one reason or another. You get mad at yourself and you start getting afraid of missing out on the profits, so you jump in at a terrible entry point, typically this results in a loss.
- Risking too much per trade and all the problems that come as a result. I’ve written myriad articles on this.
- Not knowing where to exit the market or how to exit. Self-explanatory, see solution below.
- Generally speaking, having no capital preservation plan is the reason most traders fail and it’s the reason they let the money make them ‘funny’. Your money management plan IS the most important part of your entire trading approach, don’t think you can skip this part.
Here’s how to do it:
The only way to overcome money management problems is to predefined, preplan and just be prepared for losing before you enter a trade. Remember, any trade can lose, there’s a random distribution of wins and losses for any given trading edge. So, go into every trade understanding and accepting that it could be a loss.
- A capital management plan is the only way to train yourself out of any bad habits in regards to risk management, risk reward and so on. Your capital preservation and risk management approach are your life-line in the market, it’s your oxygen. Without it, you will quickly suffocate.
- You need an exit plan for stops and targets, etc. Don’t just ‘wing it’ on every trade. Plan out where you will exit for a target and a stop loss BEFORE you push the buy or sell button.
- No matter how small your account is, treat it with the same respect and approach you would if it was a $1 million account or even $1 billion. Same principles apply.
- Electronic digits on a computer screen can seem fake, cold, not real. To counter this, get some monopoly money or casino chips and get two jars. Each time you win put some in the winning jar, each time you lose put some in the losing jar. It will make the money seem more real to you as you touch it. I even suggest withdrawing profits from your account regularly and taking them out of your bank and touching the actual money.
- Can you sleep at night with the money you have at risk? Ask yourself, how do I feel going to bed, can I live with this amount? If you can’t fall asleep because you’re thinking about the money you have at risk, it’s time to lower your risk amount.
- You need to remain disciplined and consistent. If you stay disciplined with your money management approach for a year and then you go full-tilt and gamble it all on one trade like an idiot, not only will you risk losing all that money, but all the work you spent staying disciplined will be for nothing. You owe it to yourself to stay CONSISTENTLY DISCIPLINED. It’s the only way to make money OVER TIME. Never deviate.
- Make this stuff into mantras that you repeat to yourself daily. Believe in it, own it like a seasoned pro. Do this if you want to join the big boys.
The core foundation of all great business people including traders, investors, etc. is their mindset. The foundation upon which their success is built, is the ability to handle pressure and temptation whilst remaining consistently disciplined. The ability to stick to a plan and remain almost emotionless whilst carrying out their chosen profession, be it trading, managing a company or even being an entrepreneur, is what puts someone in the top 10% of their field.
I have spent well over 15 years practicing what I preach. I am a living, breathing testament to what we discussed in today’s lesson. I do more than just help traders with entry strategies and price action techniques in my courses, because there are other things in trading that are just as important, if not more.
When I started trading, about 16 years ago, nobody was around to teach me or explain to me the seriousness of the three points discussed in this lesson, or the many other ones we didn’t even touch on today. This is the main reason that I combine my price action analysis trading strategy with a solid mental and capital management plan to help traders achieve long-term success. It’s my hope that with ongoing study, you can master these disciplines to improve your trading, state of mind and ultimately, grow your trading account.