Staying In The Right Frame of Mind

One of the challenges faced by both professional and aspiring traders alike is staying in the right frame of mind when trading. In our last article we spoke about the importance of timing, and like poorly timed trades, other factors in life can also adversely affect your trading if you do not have a plan to handle them.

What is staying in the right frame of mind? Why is it so important?

When I made the decision to become a full-time trader, I suddenly found myself second-guessing my trading strategy and my ability as a trader. I began to doubt everything I knew and instead of focusing on flawlessly executing my trading strategy, I worried excessively about the incidentals of life such as meeting my mortgage payments and what others would think given that I had left a well-paid job to trade full-time. Was I in the right frame of mind? Definitely not! I literally had “a hundred things on my mind” and my trading results soon began to reflect the negative emotions that I was feeling at the time…

Staying in the right frame of mind simply means being able to focus 100% on trading, when you are trading. Being in that state allows you to analyse charts in a methodical way, learn from your trades and move on to each new trade without emotional baggage from your last trading result. Some traders may scoff at what I am saying about emotions, but I believe that trading will challenge what you think and feel about yourself on a molecular level. It is vital that you do not let your mental chatter distract you from executing your trading plan, or discourage you from keeping at it. Even the professionals have down periods with several losing trades, the important thing is to have a plan upfront so you know what you will do when that happens.

How do you stay in the right frame of mind?

The way each trader handles his/her emotions is a matter of choice and personality. I find the following very helpful but there are also other ways. The main thing is to know yourself and plan how you will react to certain outcomes. When in doubt, take a break. Never-ever force a trade when you are not in the right frame of mind to follow your trading strategy.

Here are some helpful ways to stay in the right frame of mind:

1. Keep a dedicated, organized trading space.
2. Have a trading checklist. Tick through it for each trade.
3. Take regular breaks.
4. Know what you will do when you experience a drawdown or losing trade.
5. Celebrate the things you do right!

Happy trading!  

Regards,
The TWP Team