Many people believe that trading simply involves clicking some buttons and money churns out. This just couldn’t be further from the truth. People also often believe that driving is a simple task. In reality, if you ask any professional driver they’ll tell you just how complex it is.
Any fool can sit behind a wheel and press the accelerator down. But the experienced now that you need to observe your surroundings, control your speed, be aware of the car’s handling, the weather conditions, the road surface, potential hazards and know exactly what to do in the event of an emergency. Seasoned traders will understand just how complex trading really is, and the large role that your mind and beliefs play in making a living from trading.
So what separates the winners from the losers? It’s actually rather simple. Winners believe they can win. In fact, winners know they can win. They know that they have what it takes, and irrespective of whether this trade is a winner or not, they know that they have a long term edge in the markets, and are therefore unattached to any one particular trade. And that, ladies and gentlemen, is the key. The outcome of this one particular trade will not affect the profitable trader in the slightest. Whether it hits their take profit or stop loss is completely irrelevant, and the trader will neither get excited when he wins or depressed when he loses.
Because he understands that profitability is built up over a series of many, many trades.
Another key characteristic needed is that of low (or no) expectations. The markets are not an ATM machine. You cannot simply state that you will make x% per month. I’ve personally made over 15% on a single trade, at times. Can I make 15% every trade? Of course not. If you’ve set yourself a target of 10% for the month and you’re 28 days in with a loss of 3% you’re going to be rationalizing setups that aren’t actually setups at all. And then you’ll lose, and get depressed. Which you shouldn’t.
So, what should your mindset be like? Well, it’s simple. First of all, you need to detatch yourself from the outcome of your trades. A simple trick is to try to get angry at winning, and celebrate losing.
This way you won’t be sweating when your trade is 5 pips away from hitting a stop. And secondly, cleanse yourself of any expectations you have. Remove that piece of paper on the wall with your weekly targets. Tell your dog to stop reminding you that you have 3 days left until the end of the month. Relax. If you don’t hit the target this month, you might fly way over your target the next month. If you achieved higher than your target this month, 6 months down the line you might have a terrible month. It’s all a part of trading.
Guest Post by Iussef Mangal of www.forexcentral.co.uk
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