As our trading journey progresses, we often find the biggest issue we have to deal with is ourselves.

This is not a profound statement – anyone who studies trading is forever being reminded that trading is ’20% about the system and 80% about the mind‘. And yet how many aspiring traders really understand this statement?

I’d suggest that not only do very few aspiring traders fully understand this, but that a good portion of traders who believe they’ve developed the mindset, only believe this because they are going through a purple patch in their trading and making money.What happens to these traders when their purple patch ends and they experience a run of losers? Is their mindset sufficiently ‘mature and developed as a trader’ that they accept this inevitable string of losers and simply buckle down and keep trading their plan? 

Is your mindset right?

Developing the right mental approach to the market takes an incredible amount of experience and understanding – there is no real substitute for this. You need to experience the euphoria of a great trade, and the downright misery of a bad one.

You need to learn to put these emotions aside and move on. And that is incredibly hard.

How many of us have seen a stock rocket 10,20 or even 30% in our direction right after we closed our position for (what we thought) was a very nice 5%? How did that make us feel?

And what about the times when our stops are taken out only for the stock to rocket once again in our direction? How does this make us feel? For some of use, we blame the professionals, they obviously went fishing for our stops! But who put the trade on? Us or the professionals? If you accept responsibility for your trading then you are well on the way to developing the right mindset.

Most traders will have heard of Mark Douglas – the man is rightly credited with writing one of the best books on Trading Psychology available – Trading in the Zone.

I constantly remind myself what Mark’s key messages are;

  • Anything can happen.
  • You don’t need to know what is going to happen next in order to make money.
  • There is a random distribution between wins and losses for any given set…

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