The correct mindset

[JollyGreen]

I read the thread about who wins and who loses and it made me think more about the mindset required to become profitable at trading.

We all have different goals, we all have different bank sizes and we all want different things in life. I am happy to bounce along stealing small amounts from the market and enjoying the reward over time. It is a joy that I no longer have to listen to a numpty boss who I cannot respect and I don't have to travel to work either in an overcrowded train or on an overcrowded road!! Please before part time traders jump up and down and say "well that is alright for you" I am just saying I am thankful I am in this position and I am not thumbing my nose at you...a la the coconut scene in Monty Python's Holy Grail.

One of the biggest differences between a good trader who makes consistent long term profits and someone who struggles to make profits is mindset. Actually I would say IMHO it is the biggest factor. With most people they start out with great intentions and enthusiasm but if they lose on the first three markets it all goes out of the window. They can get angry, lose focus or just plain give up. I have heard people say things like “Typical that always happens to me, as soon as I enter the market it goes the opposite way with my money” they then add “they know what’s happening” or they talk as if there are dark forces at work.

Be honest, how many times have you done it since you started trading? I know I did it when I started out and the frustration was unbearable. However, I knew that if others were successful there was no reason why I couldn’t be successful too.

If we look at yesterday 26th May it was a real roller-coaster ride. I won on the first three markets then I got my arse whipped on the fourth race. I almost clawed back the loss but didn’t quite make it before I got caught by the SP. Thankfully I caught a double swing trade on the next and it put me well ahead. I then made a great trade at Brighton only for the horse to be withdrawn and a big fat zero was the result. Okay so I didn’t lose money but at that stage it would have been my best result and I would be a liar if I said I wasn’t a tad disappointed.

I was reading horror stories on the forum and genuinely felt the pain of RhysMr2 who was having a real nightmare. It confirmed my view that is was a poor day. I know strike rate isn’t always a good indicator but I had 4 losing trades from 27 races and thankfully the losses on those 4 were all fairly low expect for the arse whipping trade!!! When I looked at my P&L last night I discovered I didn’t have a loss on the last 16 races.

So how does this relate to mindset? Well I realised after 5-6 races that it really was a tricky day and I needed to think again about what I was doing and how I could improve things. I have been through the mill a few times and had some real beatings by the market. I have come through them and this allows me to step back, breather deeply and think about how I can turn a negative into a positive. I realised quickly that my losses came as a result of pushing too hard. I managed to get into a good position but I had exposed myself to a large liability. On a decent day I would have been profitable but on what was a weak day I was flying above the radar. As soon as tried to close my position the market was running away from me and I was causing it. Even splitting the closing orders wasn’t working because the fill rate was so poor and I couldn’t get them matched quickly enough. In my early days I would just have given up and walked away, that or I would have gone mental and just compounded my losses. However, I decided to cut back my stakes and try again. My view was simple, if it didn’t work I could try something else or if it really was a hopeless day then I could walk away. It just meant I could keep calm and know I had given it my best shot. As it turned out, the lower stakes in conjunction with a simple strategy worked like a dream and I had a long run of successful trades.

If you find yourself struggling then try the same thing. Step back, relax and try to find a different way. If you can’t find one then you still have the option of preserving your bank and walking away with a clear head. Sadly too many people explode like I used to and compound their losses before they walk away in a bad mood. Generally if they had just thought about it a bit more they could then hit a profitable run of trades and this would change their whole mood. They would then have a positive experience and it would help them in a future crisis. If you explode and/or give up without changing your method then you will continue on the long run of negative experiences and you will never improve your chances of making it profitable long term. This game is about confidence and consistency and this is driven by your mindset; if it is negative then it’s short odds the results will also be negative.

[rubysglory]

Well written JG. Read an article a while back by Louise Bedford, a financial trader and motivational speaker. The article was headed " Fail Your Way To Success ". The first paragraph reads " People don't talk about trial and success. Usually we hear of peoples successes only after they have been through some of life's trials, having made some errors along the way. Wether in trading, or in a totally unrelated pursuit, sucessful people have often emerged victorious only after 'being through the wringer'. On any leader, you'll often find battle scars, and wounds from the physical to the emotional, which only served to urge them to greatness."

rg

[Iron]

Hi JollyGreen

Nice post!

I think that people often forget when trading that opportunity isn't fleeting.

If the current market doesn't look great, or you're not in quite the right frame of mind to trade, you can walk away. Chances are that in 5 or 10 minutes' time, an opportunity will come along that does look and feel right...

Jeff

If you find yourself struggling then try the same thing. Step back, relax and try to find a different way.

[superfrank]

PMA cannot be underestimated. If you trade with confidence you tend to make better decisions. I had a poor day yesterday - 'ended up trying to fight a few markets after getting frustrated (which always ends up in a loss).

Yesterday was a bit crazy. It seemed like much of it was manipulation using pretty extreme tactics.

I tend to trade futures better than I trade the nags because I have more respect for the markets and don't get frustrated and tend to more good decisions.

[davetimmins]

Agree with all of the above. Yesterday was a tough day, however I thought Wed was good. You will lose, just as you will win on any day. The important thing is to try to treat the losses with the same attitude as your wins. We all get angry and frustrated and I know from bitter personal experience that this has a direct negative impact on my performance. This is much harder to achieve in practice than it sounds, however.

I agree totally that you have to fail to learn and improve. If any of you have read a book called "The Talent Code" you will find that the top sportspeople, athletes, musicians etc, train by attempting things that are at the edge of their ability. This leads to a cycle of failure - slight improvement - failure - slight improvement until the skill is mastered. No-one ever got really good at anything without hard work.

[to75ne]

spot on post.