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It may seem a bit counter-intuitive at first, but to truly be in control of your trading and your trading mindset, you must first learn to lose the need to control the market. Traders often try to control the market and they aren’t even aware they are doing it. If you don’t already know, you cannot control the market, at all. So, if you are trying to, not only are you probably hemorrhaging money, you’re probably extremely frustrated and desperate in regards to your trading. You need to first figure out if you are indeed attempting to control the market and then figure out what to do about it if you are (you probably are).
Once you understand that in life and in the markets there are certain things you can’t control and that will always be unpredictable to a certain degree, you will learn to focus your energy on what you CAN control. Much like a master of martial arts, you can learn every punch, kick and block, but ultimately there are aspects about your opponent you can never control. As traders, we ‘fight’ on a financial battlefield with many different opponents, and the best chance we have at success is preparing a good attack-plan, preparing a good defense, and having contingencies in place. We do our best to prepare and navigate the market’s battleground, but we can not control everything, we can only control ourselves, what we do and don’t do, and how we handle each circumstance and situation.
Self-control is often the determining factor in trading success, relationship success and life in general. Every good relationship book will tell you the only thing you can control is yourself. What other people do, how they act or think, is not in our control, no matter how it may seem. By working on ourselves, we can learn, adapt and succeed in relationships of all kinds, but first we need to let go, and be at peace with what we can’t control. This applies to trading exactly the same way.
For most traders, it takes them years or even decades to realize this same truth; that we can only control ourselves and not the market. This mistake costs a trader thousands of dollars along the way, along with countless late, frustrating, sleepless nights.
Where Do You Actually Fit in in the Overall Market Picture?
There are literally hundreds of thousands, probably millions of variables affecting a market at any given moment. From economic news releases to all the different traders and their opinions and feelings on the market, there is just no way any human could possibly “control” or even collect and comprehend that amount of data. The only way we have to truly make sense of it, is to learn to analyze the footprint of the market; price action.
You need to realize that you are simply a single participant in an enormous sea of competitors / enemies on the ‘battlefield’…all of whom are trying to take home the prize (i.e. money) from the market. The market, as well as the other competitors in it, cannot be controlled, they don’t know you, they don’t care about you and it’s futile to try and control it / them.
Our one single goal and mission is to successfully execute our plan and execute our trading edge with as much discipline as possible, protecting our ass through risk management in the process.
Remember: You are only responsible for and in control of YOU in the market. So, don’t waste your time on anything that isn’t controllable.
Our Innate Need to be “In Control” and How it Works Against Us
Traders often try to control everything in the market except the only thing they can control: Themselves.
Human beings, in general, are really, really bad at self-discipline and self-control, so what do they typically do? They try controlling other people to make themselves feel better (since controlling themselves is uncomfortable and difficult). In trading, people do the same thing, but they try to control the market instead of another person. However, the market is even LESS controllable than another person might be, and the consequences of trying to control it are disastrous.
Being “in control” is really all about fear. When we aren’t in control, we feel afraid. This is why some people are afraid of flying; because they don’t have control of what is happening, they are just passive passengers along for a ride, despite the fact that it’s the safest way to travel. Similarly, in trading, people give into their fear of losing and so they start trying to control the market by over-trading or by moving their stops and targets all around, risking too much, etc. Doing these things gives them a TEMPORARY feeling of control, but as soon as the market does something they weren’t wanting it to do, that feeling quickly turns into anger and even panic.
You can only gain control of the market by losing your need to control it. Read that last sentence again. You must be at peace with what you can’t control and simply give up the innate need and temptation to act in such a way as if you have control over the uncontrollable.
Fail To Plan and You are Planning to Fail (Benjamin Franklin)
If you want to avoid naturally falling into a cycle of trying to control the market and not evening knowing you’re doing it, you need to become a trade planner, not just a “trader”. Let me explain:
The only real way to avoid trying to control the market is first knowing if you’re doing it or not (you probably are), the points made within this article will help you figure that out. Just remember if you’re losing money overall, it’s likely because you’re trying to control the market. Traders who are profitable are definitely only in control of themselves and have long ago given up trying to control the market.
Next, you have to make some type of plan when you’re not looking at charts and not in a live trade (so you’re objective and clear-headed whilst making the plan). This is so that you have a routine and a plan that you will follow which will remind you to stay disciplined and in control of yourself. Every trader needs to do this at least in the beginning or if they are losing a lot, because the market is like an untamed wilderness of constant temptation that will lull you to sleep and steal all your money if you aren’t paying attention.
Remember: Success happens where opportunity and PREPARATION meet. So, if you aren’t prepared with a trading plan and a way to circumnavigate your own human mental faults, you are not going to succeed.
The 4 Core Things We Can Actually Control
What are some of the things we can control in regards to actually analyzing the market and executing trades?
- Entry and Exit – You can decide when and where you enter and exit the market.
- Risk Management – You can adjust your position size and place stop losses properly so that you contain your risk on every trade.
- Mental State of Mind – You can control your state of mind by having a trading plan, understanding the market and how it works, having a trading strategy, reading daily trading affirmations and also by not becoming a screen addict, amongst other ways which I outlined in my article on a winning traders mindset.
- Business / Trading Plan – You can decide what you want to put in your trading plan. So, make sure you know what you will put in it and most of all, follow it to the T. The most important thing in trading is self-control and discipline.
The Easiest Way to Make Sure You’re Controlling Yourself
Now, this next point may not be much of a surprise to my regular readers, but I need to discuss it because it truly is the easiest way to remain in control of yourself as you trade.
The number one quickest and easiest thing you can do to immediately stop trying to control the market, is to simply set and forget your trades! It’s simply in theory, but in practice it can prove quite difficult because it truly is the definition of self-discipline and self-control. Can you set a trade up and then close your computer and walk away for a week? If you can, you’re probably going to succeed long-term, if you can’t, then I’d bet money you won’t succeed. Try it for a few trades and see how it goes.
When we talk about “controlling the market vs. controlling yourself” we are really getting into the core issue of why most people fail to make money at trading. Financial market speculation, perhaps more than anything else, is the ultimate test of one’s ability to follow a plan and ignore temptation. It’s made even more difficult because there is no boss; no one to stay accountable to. It’s not like you’re showing up an hour late to work everyday; where there will probably be a really bad consequence at some point. No, when you lose money trading or stop following your plan, no one will probably ever know but you, or care for that matter. The point is, it’s incredibly difficult to focus only on controlling yourself and to actually do it, in trading, so once you learn how to do it, you will be on the way to making money trading.
So, what this really all boils down to is You vs. You, so you have to decide which version of you will win? The out-of-control animalistic version who cares only about temporary illusions of being in control or the calm and collected version that cares only about the long-term outcome and playing the “game” in such a way that ensures that outcome is positive? You have to figure this out sooner rather than later because you certainly don’t want to just bleed money into the market over and over. You can get a “jump-start” on the entire process by learning from someone who has already been in your shoes and figured all this stuff out through much trial and error, or you can go it alone. In my professional trading course, I have a complete trading plan template all laid out for you that makes the process of creating one much easier and quicker. But, whatever you do, just know that the more you focus on yourself and on controlling yourself, the more you will see your trading performance improve.