Do you have a Pro-Trader’s Mindset?

Well anybody can learn about the Technical part of trading and it is sad to observe that most of the new traders or even experienced ones keep focusing on this part of the equation only. I know that understanding the technical part is of utmost importance as they are the basics of chart reading and everybody should be well acquainted with them before setting their foot into the journey of successful trading, but a trader’s mindset should be given much more importance as that decides how a trader would perform and manage the trades and rather, more importantly, himself or herself.

We can learn about technical aspects of trading by following the traditional approach that we use to learn anything else in this world, that is, by reading books or by taking guidance from teachers/mentors. What is really difficult is to learn the mindset as we are not aware how to do it and we were never taught about it in our school or colleges.

People can learn about the mindset by following some tips and tricks but it will still take a lot of time and experience before one can even think about mastering the mind. It’s not an easy game and there is no substitute for it. The journey is a very long and laborious one but that’s what trading is all about. It’s about enjoying the journey and most of the successful traders are really passionate and enjoy this journey of trading and they have realized that money is a byproduct of good trading.

Some points which I would like to share are as follows:-

1.      It’s a probability game – Trading is a game of probabilities and I have often said that “whenever we make a loss, we should not take it to our heart and if we make a profit, we should not take it our mind!” Both these situations will have a negative impact on our minds and we are bound to take irrational decision going forward.

 We all know that we should not trade with ego but at the same time, if we make a loss, we should not feel bad or punish ourselves or doubt our abilities. The purpose should be to keep making good trades and not to think much about the monetary reward.

2.      Don’t get attached to a trade – I know it is easier said than done but I have realized that we generally get attached to a trade because we tend to build up a lot of excitement once we find a trade and we just can’t wait to take that trade with full expectations. When that trade moves in the opposite direction, we get disheartened and start to feel about that trade and even about ourselves as traders.

 We have to remember that the trade that the trade that we are taking is just 1 of the next 1000 trades which we are going to take and we should not get so much emotionally attached to it that we end up losing our sleep if it doesn’t goes according to the plan. By minimizing the importance of that one particular trade, we can really trade with ease and would be in a better situation to take sound decisions.

3.      Write down the plan before taking the trade – This may look like a very common thing to do but most of us skip this part. It is very essential to write down our plan before taking the trade as once we have a plan written on paper, with well-defined entry, exit, position size and reason for the entry and most importantly, exit, we literally transfer our anxiety out of our brains to a well-structured plan. The next step is to just sit back and just execute our plan. I have observed that a written plan takes care of most of the fretfulness that we may develop once we are in the trade.

4.      Information overload – Earlier there was very less information available and people always used to hunt for any piece of information that they could lay their hands on regarding to the company in which they have invested or regarding the stock price which of that particular company. People used to get the stock prices by going to the broker’s office or in the newspapers. Most of the traders didn’t had the privilege to real time prices. These days, on the other hand, as the information is abundantly available, we are actually confused to decide that what is important and what is not. We tend to be overwhelmed with the information flow out there and it eventually makes us feel really confused and can very easily deviate us from our own plan.

These days with all the business channels running 24 X 7 and giving away free stock recommendations and traders and analysts giving their views on social media, it is actually very difficult to remain sane. A few steps that I have taken and I have seen many of my trader friends also practice, is that we don’t look at business channels at all and we don’t log into social media during the market hours. Most of the people that I follow are my friends and don’t give away stock suggestions. This helps me to focus only on my study irrespective of what the world out there is doing. This is very important as we can easily say that we don’t get carried away with other’s opinions but even if someone’s contrary view about our trade is in back of our mind, we will get worried if that particular stock starts moving against us. We might start thinking like “what if that guys knows much more than me??” “Did I really take a good decision by entering into this trade?”

These were some of the points which I wanted to discuss. If you have any more points that we should discuss and help each other, please feel free to share them in the comments section below. Thank you and Happy Trading !