3 Mindset Changes You Need To Make To Trade Better

by Avramis Despotis     Jul 16, 2019

Every trader wants to inherently improve themselves. Improvement is measured in plenty of metrics and over time frames as taught in any trading 101 course. However, one of the fastest ways to improve those metrics stems from the way trading is approached by a trader.

Mindset is arguably the most important part of trading. It’s what sets a mediocre trader apart from a great trader, and a great trader from a top tier trader. A poor mindset can be destructive as a trader. There are far too many traders who get stuck in a cycle of trading. They place a trade and from then on are far too invested in that trade.

They’ll constantly check price charts because they’re probably trading on positions that are too big for their capital. They’ll obsess over the profit and loss portions of a trade, continuously on their phones to check the latest updates on the trade. Some get so invested they wake up in the middle of the night in cold sweat, feeling the need to check on that trade. This isn’t exactly covered in trading 101, but is as important to successful trading as planning and research are.

Let’s look at some ways to break out of that cycle and to elevate the trading mindset.

  • 1) Trade smarter position sizes

One of the first things new traders learn is to be prepared to lose all their money. Yet a lot seem to disregard that lesson and get emotionally invested in their trades anyway. Many new traders start trading large amounts they can’t afford to lose far too early on in their career, maybe as a result of having won a few profitable trades.

Newer trades especially should be trading in position sizes that are relatively small to their overall capital and net worth. Betting a quarter of one’s capital in one go is in 9 out of 10 cases, stupid.

  • 2) A Plan For A Losing Streak

Losing streaks happen to the best of traders. For newer traders, they’re often a result of losing self-control and discipline in trading. Should this be the case, there needs to be a definite plan in how to regain that control and discipline and as a result, the ability to back into the market with the required levels of self-confidence.

This is often a matter of retraining the brain to not follow instinct blindly. That instinct is part of the reflexive side of the brain, whereas you need to engage the reflective side more. Trading needs to be routine and habitual.

An example of retraining the brain could be to set up a decent amount of trades with smaller than usual sizes and risks. The idea is to set them up and have them running simultaneously and then walk away from them. With that amount of trades out, the only way to keep track of them all at once is to be engage in frantic activity of checking charts and tabs, so might as well not bother – which is the whole point of the exercise as it teaches the value of going hands-off and letting the market work its magic.

  • 3) Work-Life Balance

While there’s probably no academic literature to support this claim, a lot of traders tend to have the types of personalities that start obsessing over the thrill of trading. Often this is a result of traders getting bored after placing their trades, so they trade more to have something to do.

The obvious way to avoid this is to have adequate distractions. There are plenty of things to do keep the mind and body busy while the market moves. Anything from pursuing hobbies to spending time with family and friends works. Some might even look into investing time to develop their trading skills – but at the end of the day, all is the same as long the distraction is productive.

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