Think about your trading for a moment; what is motivating you? You may be like so many other traders around the planet in that you trade, and trade, and trade. In fact, you may have daily or trade session targets, but rather than discontinue trading when you hit those daily targets you continue to trade and more times than not end up giving back those gains and as well taking a loss for the day. Now, the logical inference is that if you had a target amount of profit and hit that profit target you should stop trading. So, what compels you to continue? Actually, it could be a number of things like the belief that the trend is going strong and why not stay on the train or feeling “lucky” like this is your day and why not take advantage of it. The underlying reason is quite simple … it has to do with greed. When we look at greed, most of you will recognize the fact that it is so ubiquitous for traders and that you have experienced it so way too often. However, did you also realize that greed is just the flip side of fear? Greed is simply the fear of not having enough or as much as you want along with the impatience of wanting it all right now.
Trading is ultimately about money. The trader wants to expand his capital. But, here is the paradox…trading is difficult and arguably the most challenging business venture on the planet because of the psychological turmoil that is activated in the trader when he enters the trade – the fear of loss, the fear of being wrong, and the fear of failure. The point is that consistently “successful” trading is “not” about making money in any one trade. Consistently successful trading is a process; a process that requires a devotion to preparation, analysis, planning, implementation and execution. Because trading is so difficult, like any similarly arduous endeavor, it requires an activation of all of your resources (internal and external) to bear on the process. You only have a total of 100% of attention to focus on what-matters-most. If you are overly invested in P&L then you are diminishing that valuable percentage of attention in direct proportion to the amount of distortion and distraction caused by the intensity of fear and greed. By “overly invested” I mean that when you are in the trenches of a trade it is not the time to be focused on money. One of the more important points is to be dispassionate about the outcome while you are in the throes of the effort; that is to do and be the best that you can during the trade and to resonate with the reality of what your focused efforts will attract. In other words, when that final outcome of the trade has transpired this reflects reality…it is what it is. If you are so intently focused on the result of your process during the process, you are necessarily diminishing your attention and your ability to keep firing on all cylinders as you move toward the desired result.
I have often talked about having a sensory rich vision of what you want to achieve. This is a very powerful tool to connect with the passionate white-hot energy of why you want to be successful as a trader. It is your trading purpose, which ties the what-matters-most in your life to the what-matters-most in the trade. During the civil rights era, there was a saying, “Keep your eyes on the prize.” This may seem contradictory; to say on the one hand you must be dispassionate about the ultimate outcome and have a sensory rich vision of the outcome. Actually, the sensory rich vision is a tool to “refuel your perseverance” at the beginning of your trading session and during those times when your energy and your ability to sustain emotional strength and endurance in the trade are waning. This is when you want to deliver that shot of epinephrine to the system. However, when you are in the game and on the court, this is not the time to stop and drink Gatorade or get a breather or fixate on whether or not you are winning or losing. When you are in the heat of battle, this is the time to engender a fierce focus on what you are thinking, feeling and doing as it relates to the process of trading; which is to continuously be in a position of “skill optimization.”
Skill optimization is when you have consistently nurtured and built your skills; i.e., your abilities, your “chops.” Skill building is one of the only things that you should “always” be focused upon in your trading process. The skill building formula is P + ER + FL + H where P = protocols (strategies, procedures, set-ups and rules); ER = effective routines (making your behavior consistent – erratic behavior diminishes to the point of dissolution); FL = feedback loop (where you measure, verify and document whether or not your protocols and routines are providing the expected hit rate); and H = habituation (taking the entire process and repeating it religiously until it has become unconscious competence). The skill building formula if followed religiously is where you have developed capacity for emotional strength and endurance to do what is in the interest of your highest and best trader each and every time you open a trade. Employing the skill building formula is where you take the process of trading and master it. This is what consistently successful trading is about; that is, process mastery. Trading moment to moment is not about P&L even though it is true that you trade to increase your capital. Process mastery cannot be achieved without the accompanying supportive mindset. Your mindset is the sum total of your thinking (beliefs, values, and internal conversations), your emotions, and your behavior. All three of these variables (T+E+B) are intimately involved in your mindset and your results are direct reflections of your mindset.
So, if you are committed to doing your best in order to make money in your trading process, you must de-focus your attention from the money as you trade and intentionally re-focus on mastering your trading process. This necessarily means that you must develop your mindset. You must become and remain self-aware so that you are able to increase the mindfulness of your thoughts, emotions and behaviors. You must create consistency in your mechanical data (everything that relates to the mechanics of the trade – your preparation, planning and execution); and in your internal data (learning mental and emotional tools to manage your thoughts, emotions and behavior) in order to develop capacity for emotional strength and endurance during the trade.
This process is no small task and it takes a willingness to be uncomfortable in order to grow and develop the necessary capacity for emotional strength and endurance. But, if you believe in yourself and take it one step at a time, you’ll get that prize…the ability to trust in your plan, trade your plan, follow all of your rules, keep all of your commitments and move on when the trade is over. This is what we teach in the Online Trading Academy “Mastering the Mental Game” Online and On-location courses. Ask your OTA representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518.
EUR/USD mired near 1.0730 after choppy Thursday market session
EUR/USD whipsawed somewhat on Thursday, and the pair is heading into Friday's early session near 1.0730 after a back-and-forth session and complicated US data that vexed rate cut hopes.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Ethereum could remain inside key range as Consensys sues SEC over ETH security status
Ethereum appears to have returned to its consolidating move on Thursday, canceling rally expectations. This comes after Consensys filed a lawsuit against the US SEC and insider sources informing Reuters of the unlikelihood of a spot ETH ETF approval in May.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.
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