What Is A Trading Mindset?
As much as we’d love to say that you can just learn the concepts in our course and off you go to trade your capital.
We must go over an important aspect of trading and that is the psychology of it.
Here is a quick lesson on the psychology of trading – you have to be:
These qualities will help in your trading career – above all they can be taught over time by introducing habits and avoiding common mistakes.
To succeed you need a systematic (rule-based) approach that has been built from failure and greater successes
We have taught you the ultimate money management rule already, just as a quick heads up – this is called Kelly’s Criterion.
Everyone loses money trading whether it’s forex, stocks, bonds or cryptocurrencies!
So never be disheartened when you lose, accept it and move on.
Take this quote from George Soros – one of the best hedge fund managers in the world:
It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right, and how much you lose when you’re wrong.
Absolutely on point here.
Stick to your game plan!
You have learnt a lot, yet you think it’s a good idea to steer away from what you know works.
This is a huge mistake as this is where the gambler in you wants to jump out for that quick spike that is “easy money”.
You have a plan for a reason, it serves as multiple tools:
Learning from mistakes
Keeping a record of trades, so you don’t over trade
Use the plan to change and adapt to different scenarios.
Every time you deviate from the plan (that you know works), your increasing the risk of you making money.
Our job as traders is to reduce the risk taken and increase the profits received.
Back to the above example, you see a quick spike and you want to trade it for easy money… Well, on the other side that is liquidity for someone getting out of their position – if you get in too high, which is most likely, you will suffer a swift loss.
In trading, you must let to opportunities scream and shout to you – do not go fishing for trades, this is where you will force a trade and enhance the odds of losing your money.
When you know something is working, stick to it.
Even if it means you can see the set up forming for a perfect trade but must wait for a day before it has completed.
It is better for the market to tell you to trade than to tell the market you want to trade.
Risk Management, Risk Management, Risk Management!
Risk management is there for two reasons:
Protect your capital from the markets,
Protect your capital from your emotions.
Risk management must be ruthless and definite.
If you are in a losing position and you keep moving your stop loss to avoid the losses, you’re just going to get margin called – which will affect your capital and your emotional trading terribly.
Trade when you see confirmation, not when you think it will be confirmed.
This is very important.
You must wait for the market to confirm your trading idea before you deploy capital. The markets will stay solvent more than you can.
Trade your own game!
To put it bluntly, no one cares about you and your trading account apart from you.
Don’t listen to what the news is telling you, what is on CNBC or Bloomberg, what analysts are spewing out, what people on internet forums are doing because at the end of the day – they may trade differently to you and affect your trading.
Stick to what you know and only read official data released by central banks and governments.
Only use social media or internet forums to socialize and look at sneezing panda videos.
Here are some extra tips:
You must accept that you will lose trades. This is normal. No one trades at 100% accuracy. Even with a 10% win rate, you can be profitable
Don’t focus on winning or losing trades. Be objective and trade to your plan and strategies. This is your edge, so don’t change it!
You will often hear “Never love a stock. Never hate a stock”. As a professional trader, you are neutral and don’t care about the asset. The objective of each trade is to make money. You do not invest in the Euro because you love Spain and have treasured memories there.
Control your emotions, like point 2, you can’t eliminate the emotional side of trading but if a loser is a loser then cut it short!! If you miss a trading opportunity, do not chase it!
Start slowly. Trade a couple of times a day, week, or month and ALWAYS review each trade. Ask yourself – did I follow my plan?
The Secret Behind The House’s Edge In Vegas
Why do you think 90% of people lose in Vegas?
It’s down to human psychology…
Let us explain.
So if you are on a ‘hot streak’/winning, you are more than likely to maintain the amount you bet. So if you are betting $50 a time and winning, you will stick to $50 stakes.
Why? Well if you are winning, why change it?
Whereas if you are losing, or switched from winning to losing, there is a higher chance of you to increase your stake size.
So if you were staking $50 – and you lost a couple of times, most people will bet higher to recover their losses.
This is because people want to walk away from a casino or Vegas saying they won money when the casino’s know that inside of us all is a little voice that encourages to bet more when we lose and keep things the same when we win.
We are risk takers when we are losers and we are risk averse when we are winning.
It makes no sense, but it’s why the house always wins.
What Does This Have To Do With Forex?
Taking risk remains the same psychological battle as gambling.
We have the tools to not only manage this battle but to also switch it around.
Our downloadable tools help you to protect your portfolio whilst you are “cold”/suffering from losing trades and enhance your profitability for when you are “hot”/winning trades more regularly.
This alone will improve your trading performance as it is the exact tools used by institutions.