In this article, we are going to discuss the mental part of trading – “Trading Psychology.” This is a very important part of trading, and we are only going to be able to touch the surface in this blog. To become a successful trader, you will need to combine your education, experience, and psychological conditioning. This will take time, discipline, and the right practice. Remember, you have to crawl before you can walk, and walk before you can run.
I think the mental part of trading is even more important for the newer trader with a small account. It is easy to put pressure on yourself because you cannot afford to lose too much. Thinking this way can have a negative effect on your trading. If you can work on this early in your trading career, it will help you for many years to come.
If you followed your plan and have been stopped out of a trade, you need to learn how to put that trade behind you. Do not setup the next trade thinking I have to make that money back. Setting up a revenge trade tells your subconscious that you lost money and adds to the bad emotions we want to control. It also causes the subconscious to build an association between a trading loss and emotional distress. Instead, think of the losing trade as a low but predictable probability, not a personal failure. To re-enforce this, tell your subconscious what you consciously want to believe in and have the discipline to follow your trading plan.
I trade and play golf. They are very similar and difficult to do successfully. When playing golf, it is you against the course and everyone else. It is the same in trading. It is you against the markets and all of the other traders. Last week Jason Day won the PGA tournament played in Austin. Jason is in his 10th year playing on the PGA tour. In those ten years, he has played in 177 PGA events and won nine times. Six of those wins came in the last 13 tournaments he has played. Several of those wins he played with an illness or injury. Jason has always had the talent. He has one of the best swings in golf, hits his drives long and in the fairways most of the time, is a good ball striker and puts well. What changed?
He started focusing on the mental side of golf. If you watch him play now, he is very focused. He does the same pre-shot routine on every shot. He actually stands behind his ball, closes his eyes and visualizes the ball flight that he wants. Most amateur golfers focus on the negative right before hitting the ball– Please do not hit it out of bounds. Jason focuses on hitting it long and in the fairway in his pre-shot routine.
Now take these same types of thoughts and focus on the positives in your trading like a professional and not an amateur. Golf is one shot at a time, focus on the present and not the past. Trading is one trade at a time, focus on the present and not the past.
In the next blog, I will show you a tip on how to visually see your trade on the charts.
I hope this was helpful.
Want to see more from Tucker Stipe? Check out his daily trade commentary, analysis, and trade recommendations at Simpler Stocks.