Psychology is a huge negative for trading

There is no way to will yourself into a winning trade. No matter how many cold showers you take, no matter how many pushups you do, no matter how much sleep you get you will not make a winning trade based on your mindset.

We’ve all had days when we’ve stumbled to the screen bleary eyed and hungover and traded our brains out and other days when we’ve been perfectly tuned physically and psychologically only to see weeks worth profits disappear in the blink of an eye.

Winning in trading has nothing to do with how you feel and everything to do with having your strategy align with the market environment. On range bound days you can buy bottoms and sell tops without placing a stop, walk away from the screen for hours on end and come back to a nice fat profit even if that morning you had a knock-down-drag-out fight with your spouse, are suffering from pulmonary pneumonia or simply hate the world and everyone in it that day.  

Why? Because trading isn't about psychology, it isn’t even about making money. Trading is the art of making good decisions and psychology is actually the single biggest source of sabotaging that process.

Tell me if this sounds familiar. You are trading okay, the day is proceeding to plan and you get a new signal on your strategy. You hit the buy button and turn away for a second to check an email or a DM.  You turn back to the screen and realize that instead of being long you are short and worse than that you are short 10 times your intended size because you set the trade up incorrectly or your cat walked over your keyboard or your trade copier failed or blah blah blah blah

What happens next? 99 times out of 100 blind rage or debilitating fear takes over and you make  the situation much worse by - A. staying in the trade hoping it will turn or - B. trying to trade your way back to break even right away.

In fact almost every single account blow up can be traced to this simple sequence - something surprising happens either with the execution of the trade or with the market price action all of which is highly adversarial to your position. Your base instincts of self-preservation take over without you even being aware of it. In that moment of anger and fear all the “mindfulness” exercises offer little solace and provide zero value.

Psychology in trading is a “negative externality”. It won’t help you to make winning trades but it is excellent at making sure you make the worst decision possible to ensure the blow up of your account. 

When traders talk about “experience” - this is what they mean. Experience is simply a polite way of saying you’ve been in the market long enough to have been f- over every which way possible. An  “experienced” trader just like a war hardened veteran harbors  no illusions about human nature or the fairness of the state of play.

But even if you’ve had tons of “experience” you won’t stop blowing up accounts even as surprises begin to look more and more familiar. 

In order to short circuit the destructive A or B self preservation pattern discussed above you have to have supreme confidence that your strategy can overcome whatever adversity has been thrown your way. Only then can you stop. Regroup. And rebuild.

But confidence only comes from competence which means that you must develop a feel and create viable rules for when to trade range and when to trade trend and no amount of meditation will help you succeed until you master that one key trading skill.