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Take Control Of Your Trading. How Can Shift In Mindset Trigger Shift In Results?

In the Late 2016 i looked myself in the mirror and i decided never will i focus on winning and loosing trades, Positive or Negative statement rather i will focus on eliminating mistakes. Well i did not succeed 100% since as human beings nature is we make mistakes due to various reasons but we have the ability to control and minimize the mistake rate down to 1% . I knew this task could not be achievable over night so i made a goal that on every month i would make 2 mistakes less than the previous month.

Let me tell you something. Never let anyone tell you there is nothing in consistency. Fast forward one year later in late 2017 i achieved my goal, in the first few months things where very terrible but i gained track since i started decreasing the number from 2 mistakes per month to 1 later went to zero. I admit at some point i make human error but its nothing compared to 2016.

if you’re not seeing the results that you want from your trading, you have no one to blame but yourself. Okay, maybe that’s a little harsh, but I would bet that for most traders it’s true. Many make the decision to trade not just for the dreams of becoming wealthy, but because it offers a massive amount of control. Control over their finances, control over their time, control over their decision making and ultimately control over their future. All of this can be achieved in the financial markets, unfortunately, it rarely is. Excuses such as “I don’t have the time”, or “I never formally studied economics” are often used to justify the struggle. But the reason that so many traders struggle is because they lack control over their trading by lacking control over themselves. Taking control of your trading begins with understanding where you’re at in your trading journey.

There are 4 stages that a trader will go through but I will explain 3 of them first.

  • Unconscious Incompetence
    This is the beginning stage of trading where “you don’t know what you don’t know.” Imagine a baby child exploring the world with a lot of curiosity and zero fear of the dangers that exist in the universe. Many traders will begin at this stage until they have the time to become more educated about the markets or learn from their own mistakes.
  • Conscious Incompetence
    Here the trader will begin to realize that being successful isn’t as easy as they once thought or seen on social media. Just buying or selling won’t get the Job done and the thrive to acquire knowledge begins. Here is when you come across hundreds of online communities a trader is really scavenging for information about the markets. Most traders at this point are cocky but in real sense they have less than 1
    % of the information need to be a successful trader. Also at this point traders have lost a huge chunk of money and some quit but some become scams.
  • Conscious Competence
    After picking a strategy and back testing it, creating a solid plan, the trader now feels invincible he\she thinks have done everything possible and become successful. But when they start live trading again they begin to notice a few minor set backs standing in their way of consistent profitability.

The fourth stage is not too important because 90% of traders never make it past the third. Many will quit when trading becomes difficult and others will find themselves stuck, but this just one step away from the prize. This becomes an endless viscous cycle between stage one and three. Being stuck at this stage is very stressful and consumes a lot of mental energy. Its like playing a puzzle box and you can not match the color’s on one side. Why? becomes the main question and when no answer is available blame is thrown at the market, the broker, the strategy and of course the mentor. The make the trader go back to the drawing board searching for a new method, mentor in order to extract profits from the market and again the cycle starts over again.

There are countless number of profitable strategies that exist and if your strategy made it past the past initial testing of back testing and demo trading phases then i a very sorry to tell you that the problem lies within you. A study was conducted in 2011 by David Rodriguez and Timothy Shea which looked at 2 years data and over 12 million real trades from fxcm clients worldwide. The study showed that on average traders where correct more that 50 times. So instead of shifting the blame elsewhere the key is to make change and take responsibility by dealing with it. Going back to the study, if an average trader doesn’t have a problem finding winning trades and yet 90% of traders never make it past the conscious competence stage, then what’s holding trader’ back from success? This question was addressed in the same study and it was found that the average profit per trade was barely half of the average loss per trade.

Knowing this data, it’s easy for one to come to the conclusion that in order to fix this problem a trader simply has to ensure that each trading opportunity provides them with a positive risk to reward ratio. However, I would assume that most traders are well aware of this, yet the problem still exists. So if not that then what? In my opinion, the problem lies, not in the analysis that takes place before the trade, but within the trader’s mind after the order is executed.

“Money is the Root of All Evil”
Many of you have heard this phrase before, and when it comes to trading this certainly holds true. Financial gains and losses are a huge trigger for our emotions. Greed, fear, pain, shame, arrogance, anger and depression are all feelings that are directly associated with the earning or loss of money. Close your eyes for a second and think about how your last losing streak made you feel. Were you angry that your hard-earned money was taken away from you? Were you scared knowing that you may end up losing more? Were you discouraged, depressed, or even in a state of panic as your account slowly bleed out and you couldn’t seem to make it stop? How about after your last winning streak, did you become greedy and start holding positions past targets in an attempt to get every last drop of profit from the market? Did you become overconfident and start taking trades that you shouldn’t have, believing that you’ve mastered trading and would never lose again? Were you scared, knowing that you’ve struggled in the past and are now wondering if this current winning streak is simply luck and not skill? These are the feelings and emotions that surround every trader each time they put money at risk.

Successful traders learn how to control these emotions, while struggling trades allow them to influence their trading decisions, resulting in the self-sabotage of their trading results. The connection between emotions and money comes from one’s core beliefs that were instilled in them from a very young age. Therefore, it would be foolish to assume that they can easily be changed overnight. Just like a bad habit, getting rid of these believes and emotions shouldn’t be the goal. Rather the focus should be on how to replace them.

Process Over Outcome
In order to make a change, a trader must shift what gives them pleasure and pain. Typically pleasure and pain are directly related to the outcome of the trade. A profitable trade provided the trader with pleasure, while a losing trader causes the trader pain. The same can be said for how “good” and “bad” trades are defined with “good” being used to describe a winning trade and “bad” being used to defined as a trade that loses. These associations are based on the outcome of the trade, something that we have zero control over no matter how great our system is. Instead of punishing or rewarding ourselves over something that is out of our hands, we need to focus on controlling what we can control and that’s the execution of the trade. A system/strategy with a positive expectancy means that the trader has an edge over the market. It’s impossible to predict the outcome of any given trade, but when trading with an edge we can be quite confident that the long term results will be in our favor. Therefore, the only job is to consistently execute the system/strategy day in and day out. For a trader with this type of mindset pleasure and pain are no longer based on the outcome of any given trader, rather they’re strictly determined by whether or not the trader has followed the correct process for executing the trade. Win or lose, a “good” trade is defined by the trader following their rules and a “bad” trade is defined by a trader making a mistake.

Eliminating Mistakes

The Japanese have a philosophy called “Kaizen” which means continuous improvement. After World War II they implemented this philosophy/management concept into many of their factories looking to take a slow and steady approach at rebuilding their economy and industry. I took this same approach with my trading and in late 2016 I looked myself in the mirror and decided that I would no longer concentrate on winning and losing trades, or profits and loss statements. Rather my single focus would be on eliminating my trading mistakes. I knew that a task like this couldn’t be achieved overnight so I made it my goal of mine to end each month with at least one less mistake than the previous month. That meant that if I made 20 trading mistakes during the month of January, then my goal for February was to make no more than 18. It was a lengthy process but as I slowly started to reduce my trading errors, my account started to grow as a direct result and more importantly so did my confidence.

Unconscious Competence
This is the final stage of trading where a trader seems to be running on autopilot. Trading has become somewhat boring and monotonous due to the fact that trader is analyzing the markets and executing the same type of trades day in and day out. The rush that comes with being up big is rarely there and the emptiness that comes with being in the red no longer has an effect. All that matters is the consistent execution of the trading plan and if you can completely control that, then you’ll have full control over your trading future.

Thank you for taking your time to read this words if you have any opinion please leave a comment below.

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1 month ago

I needed to read this! Thanks!

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