Developing the Correct Mental State for Trading

Our detailed page on The Importance of Developing The Right Attitude For Trading spoke about the correct approach you must have for dealing with the stock market.

Another important factor which affects our thinking while trading, is obviously, our mental state.

Our lives and our surroundings have an impact on our work.

Don’t we all agree with this?

The distinguishing factor between consistent winners and consistent losers in the trading market is the trader’s attitude.

It does not have anything to do with the market.

It is not difficult to start trading and just after a few wins, fall in the trap of believing that you have everything you need to trade for success.

Basically, it wouldn’t be wrong to assert that it is all in your mind.

Remember that even novice traders get an opportunity to see a string of wins.

Had market analysis and knowledge been so important, this wouldn’t have been the case.

While dealing with the stock market, we’re constantly hounded by questions – “How can I invest in the share market?”, “Am I risking my hard earned money?”, “Is this the right approach?”

In such situations, always take a step back and analyze the situation.

If you take a bird’s eye view on trading, you will realize that trading is all about buying and selling at the right time.

It is precisely that easy.

However, this brings us to the question – if trading is just so simple, why do most people fail miserably at it?

Moreover, what is it that makes their learning about the market and its ways go to drain?

It’s All About Your Thinking

The answer to every question you put up here lies in what you think as a trader.

You thinking and attitude reflect on your trading results in a way that you cannot really imagine.

Trading is easy for anyone who thinks the right way.

However, whether you are going to find it easy on a consistent basis or not largely depends on your mindset, attitude and thinking.

Just like happiness and job satisfaction are mindsets, consistency in winning is also a mindset.

You can make progress and clinch some wins even if you don’t have the right mindset.

However, the rate at which this will happen for you in the future depends on your mindset.

To comprehend the concept, let us take the example of happiness and fun.

If you are involved in an activity, can you be happy even if you are not having fun?

Having fun and being happy go hand in hand.

Therefore, it is not really possible to shift your mindset to happiness even if you are not having fun.

While it may happen that the external circumstances may change in such a manner that this shift may occur to you, but it is really difficult to propel this shift based on internal changes.

So, what should you do?

You must develop an attitude that eliminates all the factors and reasons that are keeping you away from happiness and fun.

Having a fun-type attitude is the solution to your problem.

Taking a lead from this, traders who achieve success on a consistent basis do not do it because they possess some special knowledge.

In fact, what they achieve is just a reflection of what they are and what they think.

They don’t strive for consistency; it is a part of their existence.

If you take some time off to think and analyze the trades that you have won, you will realize that they were the trades that you did not pay any special effort towards.

Effortlessness and the ease with which these trades occur are the two most notable characteristics of this trade.

You, as a trader, did not have to do anything to make them easy and effortless; they were just that on their own!

This is usually the case when you are in form or right flow.

You just don’t need to do anything.

You will automatically get the information that you need and all that you need for your success will come to you.

Over-trying hasn’t really helped anyone who is looking for success in trading

Like we said in the previous chapter, you need to develop the right mindset for success.

However, what is also equally important to achieve is a pain-free state of mind.

A loss can easily put you in a state of emotional and psychological pain.

The first step towards a pain-free state is to stop thinking about what happened.

Over-analysis of events is usually the cause of all misery.

The could-haves and should-haves hurt you more than anything else and leave you in a much deeper abyss of self-pity.

To become a master trader, you need to learn to overcome any feelings that block or limit you.

What happened is long gone and unless, you are willing to repeat history, you shouldn’t go back to it for references too often.

If you are left questioning as to what makes the pain all this bad for you, here is what you need to know.

When something has really hurt you, your body, mental and physical processes, makes all the efforts possible to avoid such a pain from occurring to you again.

However, this generates fear and like we have said time and again in this book, fearlessness is the fundamental trait to possess for a master trader.

So, the pain will not only hurt you on a personal level, but it will also hurt your future endeavors.

Just don’t look at your market expeditions as a struggle or war against the market.

You are not fighting anyone.

You are just competing for your own benefit.

Although, there is a thin line between these two, it is this thin line that sets an unsuccessful trader from a successful trader.

Now that you must settled on the fact that you need to be fearless and get rid of anything that limits you.

The next question that arises is how can you achieve this?

The answer to this question is simple.

You need to accept the risk!

Comprehending Risks

If there is one concept that is truly misunderstood about trading, then it is accepting risks.

Most traders believe that trading is a risky activity.

The very fact that they are involved in it despite its risky nature makes them believe that they have understood and accepted the risks associated with the activity in full.

However, this isn’t true at all.

When we say you need to accept risks, we don’t just mean the financial loss that will occur.

There is no way you can escape that.

This level of acceptance doesn’t come as an option.

What you need to accept at the higher level is that the risks are there and losses will occur.

Risk and losses will occur but you need to equip yourself to take the losses in without emotional discomfort

You need to be ready to face the consequences of your picks and decisions.

Here, we shall present to you a thinking strategy that will help you deal with risk acceptance in a better manner.

Using this strategy, you will be able to develop a mindset that doesn’t expect the market to do anything for you nor does it put you in a position where you are trying to avoid situations.

What it will do for you is that it will allow you to take advantage of opportunities to your full capacity.

How is it possible to avoid fear and emotional pain with all that is there at stake?

You may be proved wrong and you may lose money.

Such risks possibly exist for you no matter what and in such a situation, in order to be fearless can be too much to ask for.

It is true that discomfort and fearlessness are understandable in your scenario.

However, the point that you may be missing out here is that the risk is same for all traders, but the degree of risk for each of them is not the same.

Each of us has different levels of emotional sensitivities.

Therefore, what may be emotionally tearing for one may not affect the other to the same degree.

Simply, not everyone has the same fears.

To understand this, let us narrate a little story to you.

A man was excessively scared of dogs.

In fact, his scare was so grave that he used to freak out at the very instance of encountering even dogs that his friends had as pets.

One day, he was invited to a friend’s place for dinner along with his family.

This friend had just got a new dog pet.

So, he brought it out to show the pup to everyone else.

The man jumped from one sofa to another in fear.

However, his daughter was so fascinated by the dog that she confronted it and played with it the whole evening.

The man was totally astonished at this instance.

He had always assumed that his daughter shared the same set of fears as him.

In the same manner, most people assume that master traders also suffer from the same fears as we do and master strategies that help them mitigate these fears.

This is just not the case.

Their fears may not be same as your fears and you don’t really need to mitigate the fears that don’t even exist.

Most people start out as winner and a little turn of fortune turn them into losers.

While some people decide to quit trading at this stage because of excessive losses and the pain that accompany it, others choose to transform this pain into something better and bigger.

They use this pain to develop within them to develop the attitude to keep going fearlessly despite the loss.

For most master traders, this shift isn’t intentional or something they worked hard for.

This is perhaps the reason why most master trader’s accounts do not mention anything of this sort.

So, even though the accounts of traders may not give you any useful clues on how you can be a master trader, understand the fact that you can also think like a master trader and become one as you move along.

How To Align Your Mental Environment According To The Changes

All that we have discussed in this chapter so far must have got you ready for what we call the ‘real work’.

You know all that you need to do to make it right in trading.

Now is the time to start doing something on the ground.

The theory that we will discuss in this chapter manipulates edges and probabilities to help you achieve your goals.

The core of this strategy is the fact that you must create a different relationship with the market.

You must not have any kind of enmity with the market.

In other words, you must refurbish your beliefs about losing and failing.

Moreover, the market isn’t something you are at war against.

You need to believe that market is not threatening you. The fears that you develop for you

You need to get out of that mode right away.

When you start believing that the market isn’t threatening you in any way, the fears that you experience as a result will automatically be gone.

So, you are less likely to make errors, most of which occur as a result of the fear that exists within you.

We are not saying that getting to this mindset will be easy.

It certainly won’t be easy, but it won’t be as difficult as it is assumed to be.

If you have ever been into computer programming, you will know how a single syntactical error can make thousands of lines of code buggy.

Similarly, a slight issue with your mindset can make all the right things about your thinking wrong or simply in a ‘non-working’ mode.

So, what do you need to do to get it right?

You need to find the error and fix it.

This does not mean to say that you have a flawed mentality.

Each one of us has one issue or the other.

You don’t really need to make major changes.

Sometimes all you need to do is a perspective shift.

It is just like the ‘eureka’ moment, the moment of enlightenment.

Suddenly, you will realize that a slight change has got the ball rolling for you and you may be forced to ask yourself as to why didn’t think of all this before.

Sometimes, you may not even need to install anything new into your system.

It is all within you; you just need to discover it.

The keyword here is ‘awareness’.

You need to be aware.

However, your work doesn’t end here.

If it isn’t something that is part of your functional self, you will need to work on it.

For instance, people who are scared of snakes are usually aware of the fact that not all snakes are dangerous, but this awareness doesn’t help them overcome their fear unless they make an effort for it.

To overcome fears, you need to proactively work towards this cause and this requires a good amount of motivation on your part.

Most of our fears remain as such because we don’t wish to go through the process of working on ourselves to overcome them.

So, we chose to live with contradictions in the sense that we know that our fears are baseless yet we continue to live with them.

Coming back to trading, traders may have conflicts and contradictory beliefs in their mind, which may strike off positive intentions.

With this said, it is also important to mention that contradictory beliefs aren’t the only problems.

The assumptions that traders have about themselves also play a significant role here.

They may believe that they are risk takers, but they do all that they can do when it comes to avoiding risk in trading expeditions.

All in all, non-functional awareness and contradictory beliefs are the two things that affect your trading mindset the most.

It is similar to pressing the accelerator and brake pad together.

So, while you believe you must be moving forward, your system isn’t really sure about where you are going.

Make sure all the steps you take are done with confidence.

Make yourself accept your actions and you’ll see how everything unfolds brilliantly.

Stay tuned to as we are soon going to bring to you a detailed report on Perception, Learning and Risks associated with investing in the share market.

Until then, read on and explore!