In trading, mentality is one of the most important ingredients for success. Without the right mindset, the motivation, and enough “emotional capital,” it simply becomes impossible to succeed at this game. It’s for good reason that you often see former top athletes, special forces soldiers, and other high-performers becoming some the most successful traders and fund managers in the world.
As you may have guessed, these people didn’t succeed because of the school they went to or because they have an unusually high IQ. They succeeded because they have the mental clarity, resilience, and discipline to work their way through tough times. As traders we know that we will encounter losses from time to time. The secret lies on how we deal with those losses and where we move from there.
In this article, we will cover three very specific things that you can do to step up your mental game and boost your trading performance.
1. Be present
Being present and actually having our minds on what we are doing at the moment is becoming increasingly difficult in these crazy times we are living in. To be frank, most of us are probably struggling with information overload. Bombarded with news, analysis, and “good advice,” it becomes very difficult to filter out the good stuff from all the nonsense out there.
As professionals in our field, we must make an effort to stay focused on what you are doing. When you are not placing trades, review past trades in a systematic way and with a critical view, and write plans for new set-ups that are unfolding. Absolutely avoid killing time by just randomly looking through charts on your computer. It easily leads to overtrading and losses, and is the amateur’s approach to forex trading.
2. Cool your mind
Think back about the special forces soldier we mentioned in the introduction. What really characterizes someone like that? Perhaps most importantly, they have an amazing ability to quickly revert to a calm state of mind after having been through intense experiences.
The same is also very important for us as traders. Although we are not risking our life in the way a soldier may be doing, we are risking our own hard-earned money, which also matters!
Professional traders have different techniques for regaining their focus after intense experiences like for example a heavy loss. What most of them have in common, however, is that they get away from their screens for a while.
Some go out for a walk, some do sports, and some just choose to take the rest of the day off after a bad experience. These experienced traders know that the cost of them going away, even for a week-long holiday, is far lower than the risk of making more mistakes in the markets.
3. Know your limitations
A high degree of self-awareness is another critical trait that many professional traders have in common. It is also often said in the markets that trading is one of the best ways to learn more about one’s own personality, although it might become an expensive lesson for those not suited for trading.
However, knowing one’s strengths and weaknesses applies as much to a trader’s strategy and methodology as it does to his personality. You need to know under what conditions your strategy performs well, and when it does not perform well.
The same goes for yourself. Do you feel focused in the morning and more or less useless at night? Then you better schedule your trading for the mornings. By knowing your strengths and weaknesses, you can learn to take advantage of it to the level where you become the best trader you can possibly be!