It may seem a contradiction to say that you don’t want to pay attention to the profit of a trade. In fact, many of you might be saying that this guy must be smoking rope to say that profit is unimportant. Well, to clarify, that is not what is being said. Of course, profit is one of the main reasons why you are involved in trading in the financial markets.
However, when we discuss how you will garner your mental and emotional resources in order to become consistently successful, profit (in any one trade) is not where you want your focus to be. Profits come as a result of “probabilities” over a series of trades. In fact, profit can be a major distraction and the cause of erratic behaviors that beget unwanted results. Let’s face it, results, consistent positive results, are what you want. Anything else is unacceptable. So, your main trading trajectory must encompass this reality. Consistently successful trading requires a laser focus on what-matters-most; alignment of body, mind and emotions; and an ability to be truly disciplined, for starters.
The Distraction of Trading Profits
Let’s look at how focusing on profit can position you to attract the very undesirable results that you want to avoid. Profit is transient which means that it is not only variable but it is random to the point of being capricious. No matter how good your methodology, you cannot predict what price action will do. The only thing that is certain about the markets is that they are unpredictable. Due to this level of randomness, profit is an extremely inefficient data point to measure against results.
In fact, one of the worst things that can happen to you as a trader is to be profitable early in the game before you intimately know your strategy. This type of profit is almost invariably luck. Luck is totally unsustainable; and in your attempt to replicate these results you will reinforce bad rule violating behavior that is very hard to halt, creating many more losses as you attempt to extricate yourself from that abyss. Furthermore, when you focus on profit alone, your attention is fragmented and your mental state is susceptible to distorting data due to a confirmation bias (the tendency to only perceive information that confirms your limiting beliefs about the current market and consequently denying information that is contrary but critically important).
Actually, you want to approach the trading process with your eyes wide open and embracing the fact that any trade can lose, and some will. No matter how strong your strategy, you must accept the randomness of the markets and therefore be very serious about protecting your capital; in other words, using and relying on your stops. In this way, you will begin to manage your fear…a very important skill.
One of the facts about consistently successful traders is that many of them have blown up accounts; and they came back. When this happened, they realized that the world didn’t come to an end and developed a deeper appreciation for the importance of their stops. They created consistency in planning their trades, trading their plan, following all of their rules, and thereby developed the capacity for emotional strength and endurance in the trade.
Trading is a process oriented endeavor for those who are serious about becoming and remaining a consistently successful trader. In any one trade, it is not about the outcome. You must remain dispassionate about that and reserve all of your focus to be honed on what you are doing and how you are doing it. This is what we teach in Mastering the Mental Game online and on-location courses. Ask your Online Trading Academy 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
EUR/USD rises toward 1.0700 after Germany and EU PMI data
EUR/USD gains traction and rises toward 1.0700 in the European session on Monday. HCOB Composite PMI data from Germany and the Eurozone came in better than expected, providing a boost to the Euro. Focus shifts US PMI readings.
GBP/USD holds above 1.2350 after UK PMIs
GBP/USD clings to modest daily gains above 1.2350 in the European session on Tuesday. The data from the UK showed that the private sector continued to grow at an accelerating pace in April, helping Pound Sterling gather strength.
Gold price flirts with $2,300 amid receding safe-haven demand, reduced Fed rate cut bets
Gold price (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark heading into the European session.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
US S&P Global PMIs Preview: Economic expansion set to keep momentum in April
S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity.
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