The Mental Game of Trading

The Mental Game of Trading

 The Mental Game of Trading















Two of the biggest obstacles in trading is managing risk and using a winning method. However, even if you control your risk on every trade and have a methodology that is a winner in the long term you can still be tripped up in your own mind. Even while managing risk you will probably lose 10% t0 20% of your capital or even more with a more aggressive system in a draw down. Even with a robust trading system or methodology that wins in the long term you have to sit through losing streaks of 10-20 trades at some point in your trading career. What does it take to come back after you lose, after you lose big, or after you lose over and over. Even under performing for a month or quarter can put pressure on a trader. You add in dealing with the evaporation of paper profits a missing a trade that would have been a big winner and the trader can really beat themselves up mentally.

So how do we overcome the mental side of trading?

On the trading floor of the mind the bears of  fear, stress, nervousness and unworthiness battle against the bulls of faith, passion, focus, and confidence inside the trader.

Your success in trading is directly related to what is going on in your mind. When the analytical you that is preparing to trade is the same you that is trading under the pressure of live markets with real money on the line, then you have gone tot he next level. It is not the time to be pondering risk management, position sizing, and exits and entries while you are entering and exiting trades during market hours. You should be doing nothing but implementing your plan in live trading there should be little if anything to ponder it should be focused execution.

If your losses are eating you up emotionally you must lower your position size and risk per trade until you find the level where your emotions disconnect from your losses. You have to find the sweet spot where your wins are big enough to be worth playing for and your losses are small enough to not break you mentally or emotionally.

To win the mental game you must have…

  1. …faith in yourself.

  2. …faith in your system.

  3. … an understanding of what size trading you can handle.

  4. …an understanding of the level of losses you can deal with mentally and emotionally.

  5. …a love and passion for trading.

  6. …the belief that it is possible to win in trading.

  7. …the belief that all your hard work will be worth it.

  8. …that you are a trader.

  9. …the ability to have your but kicked over and over but keep coming back.

  10. …the perseverance to not stop trying until you are successful.

My journey through the markets were brutal and emotionally trying to the highest degree but I can tell you that you can come out the other side with a prize that was well worth playing for.The markets are a lottery that you can actually win by working hard enough at it. You can put the odds in your favor.