What makes top traders stand out from the crowd and achieve results that for the most are just behind imagination?
The key to success is being mentally tough
What does it take to be mentally tough? There are three qualities for traders who say they want to perform at the highest levels.
1) Be Ambitious
Can you work on your trading alone or you need to be constantly spend time on Social Media, watching Blue Channels, watching World maret ? Can you find ways to make your daily and weekly trading preparation regardless of family, friends or other potential interruption?
Usually traders that can work and prepare themselves alone tend to have higher levels of mental toughness and are way more ambitious.
2) Discipline is key to success
Do you work on your mental and psychological weakness to pursue those goals? Do you write your Journal and write your mistakes. Do you work on them and make sure it does not get repeated again. DO you know when to STOP trading.
If you don’t really believe that you can improve, it is difficult that you can really grow as a trader.
3) Perseverance and Patience
Are you willing to trade, train and struggle with markers for all of your life? Are you looking for immediate success, or you can postpone it until the time is right, even if that is years in the future?
Successful traders are nimble and determined to improve for all their life, no matter how rich they become. Traders need the patience to work steadily during tough times, drawdowns and family issues.
Mental toughness is maybe the area of trading where the nurturing part of the success equation is most evident. Some traders have internalized these qualities from the very beginning of their adult life and come to trading already mentally fitted. Others have not. For the latest trading can be a double challenge that starts with improving their mindset first and their technical trading skills later.
Perhaps the best thing you should do to improve your mental toughness is to work as much on psychology preparation as you do with market preparation. And, yes, it takes double time and double effort!
Reacting to Losses
So we have a string of losers… we follow our strategy perfectly, take positions in good quality names in sound consolidation patters. We have 5 positions open. One by one we get stopped out. We have a 10% draw down. How do you react to this? Do you feel mad, feel like ripping the face off your monitors? Want to make the money back!? It is at this critical moment that you have a very important choice to make.
You can get over aggressive, take on a gamble trade to try win the money back. You will most lilekly trade something not in your strategy at this point. You may also trade at the wrong time in the market. You feel mad, and have a loss. Your trading on emotion. However the market does not know you feel this way.. the market will just do what it was always going to do… most likley you will lose again. Say screw this and walk away from the machines. That is one scenario.
The second is you take a step back from the machine. You do your numbers, which are showing your batting average for this current time is down in the low 30′s. Your numbers are telling you to scale back. 2 things can be wrong here. “The market is hostile, or your selection criteria is wrong”. The exact steps to do now are almost counter intuitive. You must at this point SCALE DOWN YOUR TRADING SIZE. If you are getting stopped out of everything, the market could be at the start of a new correction. IF YOU SEE A PROMISING SET-UP. Take it with small size to test out the waters again! If you are wrong again, you are only wrong on a small position which will keep your profits intact!
The exact same approach goes for getting back into the market after a bear market/correction. The waters must be tested with small position size. Use the current volatile environment we are in right now. Would you want to be walking into 2-3% gap downs fully invested? This is how you sleep at night. Make your trading much easier. Test the waters with small positions, when those positions show you some decent gains… you can then step up the size and get more aggressive.
Your wrong a lot of the time
The big question is: Do you want to be right? Or do you want to make money? FULLY accept this part of trading. You are wrong a lot of the time. When you can fully accept this, many conflicts quickly dissolve. You no longer say, DAMN should have held it, or damn I should of sold it. You will no longer be afraid of making decisions in the stock market.