At Innerworth, we focus on teaching traders to cultivate their psychological edge. But some have asked us whether or not we have been overstating the importance of psychological issues. They ask, aren’t trading strategies more important? Surely, without sound, reliable methods, a trader can’t hope to be profitable. But time and again, in our studies of hundreds of traders, we’ve found that a trader’s mindset plays a pivotal role in achieving lasting success. Without a psychological edge, you’ll end up among the minions of would-be traders who seek out success yet never realize it. There are key ways you can cultivate the proper mental edge.
The most significant prerequisite is to stay calm and relaxed. You can take both internal and external steps to cultivate this optimal mental state. Internally, you should get adequate rest and use stress management strategies to stay objective and attentive. Externally, you should manage risk on any single trade. If you truly know that a losing trade has relatively little impact on your account balance, you will be more easily able to remain calm.
Attitude also plays an important role. Many novice traders are afraid to face the worst-case scenario, which is that they can’t trade profitably, or that they will never achieve lasting success. What often happens is that a great deal of psychological energy is spent arrogantly denying what can go wrong. Paradoxically, if potential problems are faced head-on, much less energy is spent dealing with them.
It is useful to cultivate a fighting spirit. Don’t be afraid to face your limitations. Workaround them instead. With realistic optimism, you can beat even the most seemingly insurmountable problem. When it comes to trading, you may not master the markets overnight, but with enough work and effort, you’ll eventually achieve lasting success.
Many novice traders get bogged down because they focus on making big profits, and the status and respect that may go with them. There’s a disadvantage that comes with taking such an approach, however. You end up putting extra pressure on yourself to perform beyond your skill level, and when you do that, you usually choke under the pressure. It is better to focus on the process of trading. Focus on learning how to trade, rather than on the extrinsic, monetary rewards of trading. Another reason for focusing on the process rather than the prize is that you will not set yourself up for failure. Striving for profits is consistent with the “made it a myth.”
The made it a myth is the idea that should you gain the profits you desire that you will, in turn, receive the status, respect, and approval you want. But the truth is that money can’t buy the status, respect or approval you desire. If you are hoping the profits you make from trading will make you feel deep down that you have “made it,” you are in for a disappointing shock. In the end, there’s no good reason to focus on the profits you make. Doing so will do more harm than good.
Finally, it is useful to focus on meeting your own internal standards rather than looking toward other traders for how well you should be doing. Everybody has his or her own unique learning curve. Some people pick up trading relatively quickly while others need to spend a great deal of time honing their skills.
Don’t make the mistake of thinking that just because you aren’t doing as well as other traders that you have less talent or are doing poorly. You may be working on a different timeline than others. So ease up. Don’t put a lot of unnecessary pressure on yourself. Accept what you can do, and keep practising. The more time you put in, the more your trading skills will develop. Eventually, you’ll cultivate the proper mental edge you need to achieve lasting success.