The secret to becoming a better trader lies in rethinking your approach and changing your current habits. If you’re dissatisfied with your current results want a mindset hack that will transform your trading game almost instantly then read on…
One of the major reasons why traders never reach their full potential is due to their tendency to become stuck in a cycle of constant trade monitoring, adjusting trades, and excessive worry. This leads to over-sized position trading, causing an unhealthy obsession with market fluctuations. Have you ever found yourself checking your trades throughout the day or waking up in the middle of the night, consumed by thoughts of your trades?
This destructive behavior can quickly become a severe lifestyle problem, impacting both your financial and mental well-being.
Why do traders fall into this trap?
THERE ARE THREE MAIN REASONS WHY TRADERS ENGAGE IN THIS BEHAVIOR:
- Over-sized position trading, causing excessive worry about the money they have invested
- Lack of skills and mindset required to be a professional trader, leading to a gambling-like approach to the market
- Trading addiction, where traders become addicted to the rush of dopamine from entering trades and end up watching the market screens all day and night
As I have mentioned in my previous posts, a trader’s goal should be to place a trade and forget about it, letting the market do its thing. All you need to do is have a pre-defined trading plan and execute it correctly. Obsessively monitoring the charts will not help in any way.
4 Solutions to Overcome This Destructive Mindset
By following these four points, you can dramatically improve your trading game:
- Trade with a position size that matches your skill level and knowledge
Beginning traders often make the mistake of risking too much too soon, leading to significant losses. It’s crucial to be realistic about your abilities and knowledge. If you’ve only been trading for a year or less, you should only be risking a small portion of your risk capital pool and net worth.
- Trade with a position size that lets you sleep soundly at night
Forget about risking a set percentage or dollar amount per trade. The only thing that matters is the amount you are comfortable risking on any one trade. Determine your real risk number by being honest with yourself about your income, debt, and net worth. The best way to determine an acceptable risk amount is through a ‘sleep test’. If you can fall asleep and stay asleep without worrying about your trades, you have found the right risk amount for you.
- Rebuild your trading confidence
If you’ve lost discipline and consistency in your trading, the key is to rebuild your confidence. Eliminate doubt and fear and work on developing the right habits and routine to boost your confidence in executing your trading edge. For example, try setting up 20 trades with a 100% set and forget mentality, aiming for a 1:1 risk-reward ratio. This exercise will help train your brain to place trades, believe in them, and let the market do its thing.
- Find the best distraction
Many traders become addicted to trading due to boredom. To prevent this, find distractions that occupy your time, such as hobbies, family time, or vacations. The best distraction, however, is an unquenchable thirst for knowledge and trading skill development. By combining all these elements, you can avoid the urge to constantly check your trades and reduce stress.
In conclusion, changing the way you think about trading is key to becoming a significantly better trader. The key to success is to be realistic and avoid the temptation to get rich quick. Trading offers great opportunities, but the more you feel like you need it to work, the less likely you are to succeed. Desperation and the need to make money can lead to destructive behavior, such as trading too big of a position size, too much, and turning into a trading addict. Be honest with yourself and start small and slow, building your confidence and skills as you learn.
By reducing your position size, even temporarily, and following the mindset re-training regime outlined in this article, you will eventually be able to execute trades with confidence and leave them alone. This is the ultimate goal of a successful trader – to act and think like the top 1% and have the world as your oyster. Remember to aim for one win at a time, be mentally detached from your trades, and execute them confidently!