Let’s talk today about psychology of a trader. This is very important stuff and it doesn’t matter which trader you are and which market do you trade. Long read warning!
Ok, let’s go:
1. Do not blame yourself of being the worst trader in the room
Being not the best trader is OK, even the worst one – it means you have only one way up in your trading skills, accept that and start learning. Be focused on improving your trading skills instead of trying to look better to others, they don’t care about you. This is the mind trap which locking from you the door of progress.
There’s people who better than you in anything, maybe they have more experience, natural abilities, just forget about it and accept that. Join any trader’s chat room or forum, there’re a lot of people which trying to prove they best to anyone in the place, just let them to do this.
Another thing is to stop comparing yourself to others. We are all different, mentally, emotionally, physically, financially, socially.. we all have a unique way of life, just be yourself and believe in yourself. Don’t match social media posts to real life, people tend to show what they like to show others, but all people have bad days and things they kept just for themselves.
Every professional trader, leader, successful entrepreneur was a beginner and had his own story of numerous failures and successes. Remember that and stop seek for a mentor, the mentor can open you the door to success, but come in you must on your own, this is the experience. You don’t need a person to follow, you only need the right things to learn and understand.
2. You can’t be right in 100% of the time
The market have many factors especially currency trading, you can’t analyze all of them, you can make mistakes, even if you have insider information, the things are changing.
There’s universal law which sounds – “Shit happens” and this law is always works.
Losses a part of this game – the best traders and hedge funds taking losses time after time, but the way how they manage the losses is separates them from 72%-95% average traders. There’s only one way to do not take any loss – do not trade at all.
3. Learn from mistakes
The worst thing you can do is react emotionally to a loss without asking yourself, “Why this is happening, what you can learn from this, and what you can do, to make sure this situation never happens again.”
Take screenshots of your trades, create track records, write down your thoughts on paper, it gives you enough data to analyze and adjust your skills.
4. Risk management not only in pips
There’s a lot of articles about risk management in a trade with calculation of the risk per trade in stop loss or how to manage your entire risk in all trades in your trading account.
But rare talks about risk management of a trader’s life. Why this is important – many want quit their hated jobs and become full-time traders, to start making their financial freedom, literally that means change 9to5 life to 24/7 entrepreneurship.
If you are young and you have parents who always support you, god damn, do it right now, start your own business, learn how to trade, invest, become an entrepreneur of your life, even if you fail and you will – 100%, they will help you survive, just don’t give up and adapt.
But if you have a family, wife, kids, cat, dog, etc. You are responsible for their future. And now managing your income and expense portfolio has become your job with no excuses. DO NOT QUIT YOUR JOB WITHOUT A WELL-CALCULATED PLAN AND CASH SAVINGS FOR LIFE WITH THE CURRENT STANDARD OF LIVING FOR A YEAR AHEAD.
Things may not work at all or stop working well for a long period of time, such as trading with one strategy and one pair may give you a profit of about zero for a month or three or even losses, is it a bad pair or strategy? – for this period, Yes, so you need diversification.
Risk management starts when you determine the worst case scenario, and your actions in that case, it can never happen, but if it does, you’re ready for it.
5. Diversification is your the best friend
Diversify your financial portfolio with different sources of income, stack it, manage it. Diversify your finances to an investment portfolio, savings, property, try rent business, start your own business or join someone else, there is nothing wrong with a good job, it is a stable low risk income that you can invest in any financial activity. This also applies to your trading process – diversify your trading with different currency pairs, or markets, strategies, trading accounts, brokers.
6. Do not believe in your strategy – backtest it
Stick to one trading strategy, believe in it and follow the rules – bullshit.
This is your life that could ends up at any moment, have you ever thought about it?
How much time of your life can you spend on a “proven strategy” from the Internet by a person you don’t even know? Month? Three? Half of a year?
Or you noticed good setups in a history by scrolling the charts and finally thinking about trading this, in that exact moment your brain avoiding other setups with losses which you will find out later by trading this strategy.
Only start trading with facts in numbers how the strategy works in this particular market and financial instrument, balance amount and risk management at least for the last year. This is not so hard as you thinking, there’s a lot of software which you can use to do this just in a couple of hours. This thing will save you a lot of your life which you can spend to most important things and people.
7. Work hours vs passive income
At some particular moment, you can focus on one particular thing, and everything else happens without your control. That’s why the larger the Corporation, the more employees it needs to manage all business processes. It’s the same with your trading, if you do all the work by yourself and can’t leave your trading terminal for an hour, six hours or a day without worrying about it – you as the boss of a big company who does all the work of all employees with his own hands. Can his company ever become big? No, because this man is about to burn out and start making mistakes very soon.
8. Bigger picture
This is straight from the number seven – let the robots short term trade, do not chase couple of pips of price fluctuations, this place has occupied by algorithms, look larger picture, analyse trends from long time frames.
9. Learn the market technology
Understand how brokers works, how your terminal get price quotes and how your trades going to the market and the difference between instant and market trades execution, what happening with your trades when you closing your terminal, how pending orders, take profits and stop losses of long and short trades reacts to ask and bid price, what’s happening on weekends, overnight rollover, news, what is triple swaps and how reacts ask price to low and high volatility, why there’s slippage, off quote errors, terminal freezes.
10. There’s no best broker
Brokerage business is a business, there’s no free stuff in there – this is marketing thing. Super tight spreads but commission, average fixed spreads in main trading sessions but same widening on news, market execution but worst market open price in high volatility, bitcoin withdrawals but offshore registration etc. Do not marry with one broker try different ones, and use which suits to your needs.
TO BE CONTINUED
Next time we will talk about trades management and various risk management tactics.
Have a nice one!