"Hi Marco, I keep on reading about the importance of psychology and the right mind-set in trading, how important is it and is it really all it takes to be successful?"
This is one of the most common questions I get and see tons of stuff written about on the internet and in trading books. I think it's one of the most misunderstood concepts in the world of trading, let me explain why.
First of all is a good psychology/state of mind/being in the zone important in trading? Yes, absolutely!
Can you be a successful trader without it? No!
If you work on this and become a really balanced person who no longer makes any mistakes because of psychological issues will this automatically make you a successful trader?
Only if you have an edge and everything else you need to succeed.
So actually the answer is quite simple. Being in the zone is an absolute requirement to become a profitable trader. If you lack discipline or have self-destructive behavior patterns that you are not aware of and don’t know how to deal with you’ll keep on losing money even if you have the best trading system in the universe.
You need to be disciplined enough to execute your trading plan and exploit your edge in the markets. If you can do that, you’re fine. But that’s pretty much it. You’re not a professional tennis player, you’re a trader.
But let’s face it, you can be 100% in the zone and you still won’t make any money if you don’t have an edge in the markets and proper risk/money management.
Trading is a puzzle and if any crucial part is missing you won’t succeed even if the other parts are all fine. One of these parts is your state of mind and that’s why it’s key to work on improving it and to make sure you stay in balance. Get to know yourself really well, know your weak spots and how to work with them. If you don’t know your weak spots the markets will find them again and again until your account is gone.
How to improve your mind? It really depends on you and what works for me might not work for you at all. For me doing some basic mindfulness exercises on a regular basis has allowed me function well in the world of trading. It simply helps you to be aware more and more quickly when you start doing something you shouldn’t do, for example trading your P&L instead of the market or not getting into a trade you should and so on. And once you’re able to see that behavior pattern playing out there’s a moment where you can stop.
Do that again and again and it becomes a habit. Keep the good ones and get rid of the bad ones!
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Editors’ Picks
EUR/USD flirts with daily highs, retargets 1.1900
EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.
GBP/USD remains well bid around 1.3650
GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.
USD/JPY edges up above 153.50 with all eyes on US CPI figures
USD/JPY appreciates above 153.00 but remains on track for a 2.4% weekly loss. Trading volumes remain subdued on Friday, ahead of the IS CPI release. The Yen remains supported by hopes of a stable government and calls for further BoJ tightening.
Editors’ Picks
EUR/USD: Yes, the US economy is resilient – No, that won’t save the US Dollar Premium
Some impressive US data should have resulted in a much stronger USD. Well, it didn’t happen. The EUR/USD pair closed a third consecutive week little changed, a handful of pips above the 1.1800 mark.
Gold: Metals remain vulnerable to broad market mood Premium
Gold (XAU/USD) started the week on a bullish note and climbed above $5,000 before declining sharply and erasing its weekly gains on Thursday, only to recover heading into the weekend.
GBP/USD: Pound Sterling remains below 1.3700 ahead of UK inflation test Premium
The Pound Sterling (GBP) failed to resist at higher levels against the US Dollar (USD), but buyers held their ground amid a US data-busy blockbuster week.
Bitcoin: BTC bears aren’t done yet
Bitcoin (BTC) price slips below $67,000 at the time of writing on Friday, remaining under pressure and extending losses of nearly 5% so far this week.
US Dollar: Big in Japan Premium
The US Dollar (USD) resumed its yearly downtrend this week, slipping back to two-week troughs just to bounce back a tad in the second half of the week.
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