In my previous post, I talked about ensuring you take action, after having a clear plan in place.
But, for many, this is where any psychological issues start to rear their head, as you start to implement your plan with real money at risk in the market.
Most people solely focus on trying to develop a method that can generate profits from the markets. But, how many market participants do you know who spend just as much time (if not more) working on themselves?
I've come across very few traders on social media or trading groups who talk about this critical element. Maybe they think it's a sign of weakness. Maybe they already have a super mindset and feel they don't need to work on it. Who knows?
These days I spend far more time concentrating and working on my mindset than worrying about fiddling with my entry and exit rules. Why? Because I believe entries and exits are the least important part of achieving trading success. Yes, you obviously need to have a method which has a positive expectancy, but after that what stops you becoming profitable?
Easy - your approach to risk and controlling your emotions and actions. As it has been said by others, the biggest obstacle to achieving success may well be staring back at you in the mirror.
The current market conditions have been a proving ground for the work that I do. It would be very easy to get angry or frustrated with the recent market action and the lack of trends, start overtrading, or taking trades that do not meet my criteria. But I have managed to keep my emotional equilibrium, patience and discipline. I have been able to step aside from the volatility and lack of direction in the markets. That may partly be down to learning from past experiences, but I have no doubt it is also down to the work I have done on myself.
I also know that there will be traders out there who, when confronted with similar circumstances, will unfortunately not have the necessary mindset and will blow a large proportion of their equity when conditions are clearly against them.
A while back, in one of my group webinars, I started talking about meditation, mindfulness, NLP and other ways how people can work on themselves. The reaction was amazing - pretty much everyone who was present had done some work in this area, and had found an immediate benefit.
One had gone on a recent two week meditation retreat. Another made sure he had a short mindfulness session every morning before he sat down in front of his PC. Yet another talked about some dietary changes he made to help control his metabolism. Someone else had just taken up Crossfit, working on the theory that a fit body is a fit mind.
It was like a dam had burst, and all these people couldn't stop talking about what they found working on themselves had done for them. Yet none of them had mentioned anything about it prior to that - it was almost like it was a taboo subject.
I recently joined a new group of traders on social media. These people are all dotted around the globe, covering a wide spectrum of trading styles, experience and instruments. However, the majority are inexperienced traders or people just starting out, eager to learn.
The host of the group asked an open question about their goals for the week ahead. Almost to a man (or woman), the 'goals' were given in a monetary amount. I struggled to find a response which focused on working on themselves (obviously that is mumbo-jumbo, right?).
And people wonder why 90% of traders lose?
At the end of the day, traders need to have a passion for what they are doing, but they mustn't channel their focus solely onto the 'dream' outcome - those people are doomed to fail. It's like trying to put the roof on a new house when there are no foundations in place.
Still not convinced?
Ed Seykota talked in his Market Wizards interview about using a combination of "hypnosis, breathing, pacing, visualisation, gestalt, massage, and so forth" to help other traders examine their priorities and align their goals.
Richard Dennis made millions from the markets. He used to regularly read Psychology Today.
Even though these two successful traders utilised a systematic approach to the markets, they still found a lot of merit in understanding how the mind works, and could use that to aid their own, and other traders, performance.
Another systematic trader I know talked about this here.
You may argue that is it alright for people like Seykota and Dennis - they've made their millions. But all traders have to start somewhere, and they found that focusing on their process, actions and emotions rather than any outcome helped them get to where they are. Successful traders will leave no stone unturned in trying to improve themselves and their trading performance.
So, what are you going to do?