Attitude is a crucial factor that determines how good or bad your trading expedition shall prove to be.
In fact, if you say that trading is all about the market, but how much profit you are able to gain out of it depends on you, then your attitude is a large chunk of what we are talking about.
In this chapter, we shall explore the aspects of a trader’s psyche, which are related with a trader’s win or loss, and look at what the ‘right attitude’ to trade is.
Take Ownership of Your Actions
When we say, ‘act responsibly’, we may sound like a parent who is trying to teach a child to distinguish precisely between the right and wrong and do what is right.
However, contrary to this perception, acting responsibly and taking ownership, as a trader, may not be so simple, not just to implement, but also to comprehend.
In fact, this commonly understood perception is the fundamental reason why most people do not take this advice as seriously as they should and end up taking it for granted.
Another important thing to understand here is that you are responsible for your successes and failures at trading.
So, if you snatch a win, all the credit goes to you.
However, if a loss knocks you down, you were the one who made the decision and thus, you are the one who will have to take responsibility for the loss.
Unless you learn to understand this point that no matter what the result, you are the one who is the center of your trading universe, none of the other principles for trading success can be of any real help to you.
Creating a Conducive Mental World
Now that we have already established that you are the one who will have to shoulder the responsibility of every move that you money makes in the market, it must not be difficult to guess that if you are not this type of a personality, you will need to work on yourself.
You will need to change yourself and sculpt yourself into the person you need to become for trading success.
Be ready with loads of will power, passion and patience before you start this.
You are going to need every bit of that!
Your situation is much like a painter who paints a picture of anything that inspires him.
Just like the painter has a canvas, you have your mental environment that you will need to manipulate for your own good.
The picture that the artist paints depends on the colors and tools that he uses.
In your case, you are going to play around with beliefs and attitudes.
You will need to
There is an old saying, ‘what you think, you shall become’.
This is precisely what you need to do to make your way up on the ladder of trading success.
You need to emulate the thinking patterns of master traders and believe that you are one.
In this way, you will be able to create a mental environment of your choice and nurture it with the fundamentals that you consider crucial.
For instance, if you talk about master traders who have seen success at a consistent basis in their trading careers, there is a typical thinking pattern that they follow.
They are fearless and careful at the same time.
They take risks fearlessly, but never make the mistake of becoming reckless.
It is these two qualities that bring consistency in their success rates.
You need to emulate and imbibe this mindset in your system to pave your path forward.
Once you adopt this mindset, you will be able to avoid the mistakes that most traders make as a result of the fear that sets in, leading to hesitation, confusion and baseless hope.
With this achieved, half the battle is won! What remains is to develop restraint.
While losing trades shall make you fearful and you must do everything to guard against this, winning trades will make you confident, and in some cases, overconfident.
You need to guard against this just as much.
You need to develop an internal discipline to keep yourself under a strict check and avoid getting carried away by your string of successes.
You can lose much more than you had won previously in just one stroke.
This is not to scare you and make you fearful.
It is just to help you comprehend how essential drawing the fine line between fearlessness and recklessness is for a trader.
Taking a closer look at the mindset factor, it will be much easier for you to realize why a majority of the traders fail at trading.
These traders have a tendency of focusing on the markets and learning concepts and techniques that can help them master the market statics and dynamics.
As a result, they lose focus of what they, as traders, need to put in.
In such a scenario, if a trader loses his or her money, the blame is usually transferred to a lack of knowledge about the market, which compels the trader to get obsessed about knowing the market all the more.
More often than not, these traders end up making bigger and graver losses than before.
Do you know why?
The problem is that they were busy focusing on something that wasn’t even on the list of causes of their failure.
If you are seeking consistency, then you need to seek it in your mind, not in the way markets work!
The attitude of a trader towards losing, failing and becoming reckless comes in as the most crucial factors instead of markets and knowledge about trading.
This may take you by surprise, but this is what the truth is.
This can be a distressing thing to know if you have spent a lot of your time trying to learn about the markets and trading secrets.
However, it is never late to get started on the right path.
Another important thing that is worth a mention here is the fact that most people start their trading careers with the right mindset.
However, as they move along, with education, learning and what some people advise them, they drift towards learning about the markets.
At the very beginning, the idea of the dangers is rather unrealistic for most people.
Therefore, they aren’t really aware of what is there in the kitty for them.
This is particularly the case if their first trade turns out to be a winner.
With every subsequent win, they tend to become more fearless.
So, they don’t weigh their alternatives or think about the consequences, they just do things with the belief that they will be successful.
There are no fears associated with making a mistake or doing something wrong.
Although, it isn’t something that you can achieve completely, it certainly is something that you must strive for.
As you condition your mind to think on these lines, you will automatically develop a positive attitude and help you deal with your mistakes in a good way.
On the other hand, criticism and failure pull down people who don’t possess a positive attitude.
Like we said before, most people start out in the field of trading with the fearlessness that is expected of them.
However, not many of them possess the right attitude.
So, the foundation is not what should have been.
As a result, they may start out with many winning trades, but the fearlessness that they possess quickly transforms into recklessness, which is a sure ingredient for disaster.
Broadly, the point that we wish to make here is that success and failure at trading are functions of the attitude that a trader holds.
Have you ever wondered what the determining factor is when a champion gets beaten at his game by an underdog?
It is attitude!
It is the fearlessness of the competitor and his willingness to see through his own mistakes and rises above them to defeat the opponent that makes all the difference.
Coming back to trading, the one thing that makes trading so easy yet so difficult is the fact that trading requires very few skills to achieve success, but the catch is that you will need to master them to reach anywhere good.
Of all these skills, attitude is one of the most determining skills.
This is perhaps the reason why some novice traders hit the winning streak right way and at time when even the best analysts in the markets face losses.
Losing and making mistakes are part of the game.
While the winning streak gives a novice trader what we call the ‘winning attitude’, if he or she does not have the right attitude, this winning streak may just end up being a losing streak with massive losses.
The wins continue only as long as there is fearlessness.
Markets are unpredictable and you can expect little mercy from them when it comes to being the way you wish them to be.
Moreover, there are several variables involved.
Therefore, you cannot control how it works and where it goes. Also, a consequence of this nature of the market is the fact that no matter what you do, you will face some losses.
They are just unavoidable.
However, the only thing that you can do and is well within your reach is to brush yourself up for dealing with these losses.
In addition, you may lose your money, but it mustn’t affect your attitude.
For people who don’t have the right attitude, losses result in emotional pain and frustration.
An important point to note here is that a trader who has experienced a loss will inevitably blame the market for this situation.
You can compare the situation of such a trader with that of a child who was playing with something and enjoying it.
However, an authority intervened and pulled the toy away from him.
In such a situation, the child obviously blames the authority for taking away the toy.
Moreover, the child will not even be willing to hear any reasons why he or she must not be playing with that toy.
Taking lead from this example, any trader who is starting out behaves like the child who has no idea about handling the instantaneous shift from the happy feeling of playing and the sad feeling of losing your fun toy.
In other words, if you don’t accept the risks associated with trading and believe that you need to concrete steps to guard against them, these connections from the past will inevitably make you believe that the market is responsible for all your misery as a trader.
So, you will start expecting the market to fulfil your aspirations.
Although, the society tends to work in this manner, the markets work in just the opposite manner.
When coexisting in a society, we can expect people to be responsible and reasonable, but the market does not possess any such responsibility.
You cannot blame the market if a trade or a couple of them did not work in the manner that you expected it to.
The roots of this assertion lie in the fact that trading in the market is much like a game.
Somebody will win the game only if someone else loses it.
Every trader who is putting his or her money on one trader or another is doing so with the sole objective of making money from it.
So, the market is only responsible for giving you a result in the form of a win or a loss and facilitating the activity.
So, in any case or scenario, if you feel that the market is responsible for your defeat, then you are perhaps not giving enough consideration to being a part of the game.
Always remember that the market holds no responsibility towards you.
So, do not expect anything from the market.
Another point that you need to pay special heed to is the fact that you need to comprehend the differences between the perceptions of the society and that of the market.
The trading market is in no way similar to the society that you have thrived in.
The more desires and aspirations you project to the market, the more frustrated you will end up to become.
Therefore, when we talk about taking complete responsibility for your actions and decisions, we mean that you must acknowledge and accept what the market has given you without any complaints.
You must always view the market as a sink that always works towards snatching your money.
However, in the process, it also gives you some chances to fight back and survive.
If you are smart enough to take advantage of these opportunities, you will end up on the winning side.
On the contrary, there may be times when you may lose without any mistake of yours and the way you handle your situation at this time will determine your future in the trading market.
Another perspective of looking at the whole situation is to believe that all the results generated from the market are self-generated.
In such a scenario, If you take anything lesser than full responsibility, your success will be blocked due to a couple of psychological obstacles.
Firstly, you may not any longer be in a position to see and take advantage of the opportunities that the market gives you.
Apart from this, this may also make you believe that you need to do more market analysis to get better at your trading results and increase the rate of success for you.
Now, let us consider these two psychological obstacles one at a time.
When you blame the market for acting against you, you are basically looking at the market as your enemy whom you need to fight against.
Every single time you lose, you will look at the market with anger and frustration just like the child who shows his anger to his parents for taking his toy away.
When caught in such a scenario, it is important to get yourself back into the neutral position.
The market has nothing to do with what you want and owns no responsibility towards you to make your aspirations true for you.
It is only when you possess a neutral perspective that you can analyze the data that the market is presenting to you.
The market only gives you data, raw information.
How you analyze this information and the conclusions you derive from the same are completely based on your knowledge.
So, the loss is not a result of what the market has done to you, it is a result of what you did to yourself.
In other words, the result is self-generated.
If you look at the situation from the market’s perspective, you will realize that there are no guidelines that define a loss or a win for it.
So, when the market gives you data, it isn’t capable enough to give you any insights into whether it will result in a loss or win for you.
Moreover, the market has no means and ways to derive and meanings and conclusions from the information.
To make the best of the opportunities that the market presents you with, you need to look at the market without any regret or self-criticism.
Having such a frame of mind shall be in your best interest.
When you face a loss while capitalizing on an opportunity given to you by the market, you classify opportunities related to the opportunity at hand as dangerous.
Therefore, all these opportunities will not be available to you, limiting the number of opportunities you possess.
As you face one loss after another, this value will increase and you will end up with very few opportunities that you believe are truly for you.
As a result, what was once a stream of endless opportunities is now restricted to only a set of filtered opportunities.
In addition, feelings of anger and frustration that result from a failure make matter worse.
When you take complete responsibility for your actions, you will no longer feel all these negative emotions.
Going back to the second psychological obstacle of getting attracted to market analysis, let us again take the example of a novice trader.
When a new trader enters the market with the will to succeed and win, he or she usually experiences some quick wins.
However, when a loss occurs, he or she is compelled to believe that it was his or her lack of knowledge about the market that has caused the loss.
So, the trader goes back to learning all about the market and market analysis.
There is nothing wrong about learning market concepts.
However, what is certainly a troubling factor is the reason why the trader wants to indulge in all this learning.
The shift from happiness of winning to sadness or loss is so swift that it is more like a shock to an average mind.
There are many techniques available for better handling of such situations.
However, most people do not take any proactive steps in this direction.
Instead, they look at the market as an enemy that has just given them a blow.
Their most obvious answer to this loss is revenge and this is why they turn to market analysis and knowledge.
The trader basically wants to prove a point to the market and prevent the same to incur a loss to him or her again.
On the contrary, if the trader had taken up the task of gaining market knowledge to know newer and better ways to plan his or her success, the story would have been entirely different.
As a result of a different underlying reason, the trader will not be able to apply his or her knowledge to his or her best ability.
So, even though, the trader has learnt a lot about trading and markets, none of the knowledge will be put to any good use.
The trader may seem confused and hesitant, which may lead to bigger losses and more frustration.
The fact that the trader spent a lot of time and energy to learn all these skills and the feeling that nothing of what he or she had learnt could be of benefit, adds up to the frustration and anger.
We, as humans, have inherent mechanisms for dealing with pain and frustration.
Whether it is physical pain or emotional pain, our minds have their own ways of dealing with the pain and avoiding it from coming to you the next time.
Both at the conscious and sub-conscious level, the mind attempts to hide every bit of information that can cause pain to you in the future.
There are many instances that show that a trader remains in the trade even after the market is signaling a loss.
So, while the trader could have just exit at the very first opportunity and incurred much lesser losses, the trader decided to remain in trade and magnified the losses manifold.
It is obvious for the trader to think as to why he or she did not take the opportunity to exit the trade when he or she had the time for it.
The reason why the trader did not take that opportunity was because he or she was blinded by past experiences and learning.
In entirety, when the novice trader begins to trade, he or she is carefree and trading with a positive attitude.
However, a few losses put the trader on the back-seat and everything that the trader does after this loss is aimed at eliminating the chance of any more losses and the pain that are incurred due to the same.
The willingness to win and prove the newly acquired knowledge forms the basis of the trader’s actions at this time.
The rise in emotional pain will compel the trader to gain more knowledge of the market and any loss that the trader incurs after the same, will make the emotional pain graver.
The trader will be stuck in this vicious cycle of experiencing pain, increasing knowledge to avoid pain and experiencing even more pain as a result until he or she decides to quit trading.
Who Wins And Who Loses Any trading experience leads to one of the two results.
The trader either wins consistently or the trader loses enough to quit the trading business.
If you go back to the novice trader example that we have been referring to every now and then, we need to make a quick correction in the outcomes.
Not every novice trader who enters the market loses and quits.
Fortunately, there are some traders who continue to win and achieve what we called ‘consistent success’ at trading.
Another class of traders also exists.
These traders win initial trades, lose some trades and even though they experience losses, they learn the tricks of the trade as they move along and master the secrets of success.
Two feelings those are capable of getting a hold on a trader are euphoria and self-sabotage.
When a trader gets started with a winning streak, he or she is likely to get into a state of euphoria.
This state is characterized by feelings of supremacy over the market.
Moreover, the trader also begins to believe that he or she cannot go wrong at any cost.
This is where the problem starts and self-sabotage begins to take its toll.
It is at the hilt of success that most traders make the most and the biggest mistakes.
This cycle of winning and losing is called the boom and bust cycle.
On the basis of what we know about traders till now, traders can broadly be divided into three categories.
The first class of traders is consistent winners.
It would not be wrong to call them active traders who have seen success and losses, but they have learnt to remain positive and focused all along.
However, this class includes only around 10% of the total trader population.
The second class of traders constitutes 30-40% of the trader population and is called consistent losers.
They are exact opposites of consistent winners in the sense that they have also seen wins, but they have seen many more losses.
Yet, they haven’t taken the cues and learnt anything positive about transforming their failures into successes.
The largest group is a group that constitutes active traders and is called ‘booms and busters’.
This class of traders knows how to make money, but hasn’t gone far enough to learn how to keep their money with them.
So, if you look at the graph of their successes and failures, you will notice a roller coaster type arrangement.
This arrangement can go on for as long as they exist in the market.
One of the hardest things to understand from a trader’s perspective is the market does not do anything to alter or create an attitude for you.
It just reflects the attitude that you already hold.
Therefore, if you meet a trader who appears excessively confident, please note that it is not his belief in the market that has made him confident.
In fact, it is his belief in his own self and his own attitude to create a positive outcome that makes him the master trader that he is.