All successful traders realize that understanding trading mentality is a crucial part of an investor’s good or bad trading performance. Our mindset determines our actions. Think about that aspect. Anything you desired to achieve, you probably had to put your mind to first!
When you were a child, learning to ride a bike may have been scary or frustrating at first. Getting down the mechanics of the bike, the coordination to balance yourself, the falling and getting back on, and the progress going from training wheels to taking them off could have taken days or months.
However, you were determined and motivated. Being able to ride your bike equated to freedom! How exciting would it be to adventure on your own and travel places with your friends? The benefits of being able to ride a bike outweighed your fears of learning, so you were able to keep trying and retain your focus on your goal.
Trading is no exception. It takes motivation, determination, and focus!
How do we achieve and retain that focus when our mental energy feels low or depleted?
3 Steps – Exercise Your Trading Mentality to Stay Focused
Step One: Plan
It all starts with a plan! If you have an idea or a goal, you must come up with a plan to achieve it. “How am I going to do this?” is the question and also the first step to devising a plan and having a focused mindset.
Just like when you learned how to ride a bike, there were steps. You had to get a bike first. Then obtain a helmet, and knee and elbow guards to protect yourself. Then figure out how you were going to get on it, stay on it, and pedal.
Do you go down a hill in the grass, try a sidewalk, or attempt to ride on a paved road? Do you have someone give you a push, run alongside for balance, or do you just go it alone? What if you fall? What if you get hurt or damage your bike? What if it takes a long time to learn?
Just like learning how to ride a bike, you have to be equipped, protected, and plan out how you are going to become a great trader!
Your equipment as a trader should be tools such as your computer, laptop, phone, broker, and research platform. Your “protection” is the education you seek. There are courses or books, YouTube, trading articles, coaching/mentoring, and so many options both off and online.
A big part of your plan should also be the money and time you invest. Whether it is funding to open your trading account or purchase your equipment and courses, you need to budget for that aspect. Also, set aside enough time to learn your new skill. Effort can only be maximized with invested time!
Once you have the tools necessary to start trading, you then develop your trading plan criteria. This is your SOP or Standard Operating Procedure. Trading strategies, market analysis, technical analysis, indicators, and your daily routine, for example, make up your arsenal in your trading plan or SOP.
Your day trading plan needs to not only outline how you make trading decisions (trading strategy) but also have entry and exit procedures in place to identify both trading opportunities and implement risk management to protect your money.
Bottom line is, being prepared and having a plan that will help maintain your focus. It is your day trade road map to success!
Step 2: Practice
With your equipment, education, and plan in place, new traders especially need to practice, practice, and practice. Just like riding a bike, it takes baby steps, training through repetition, ups, and downs such as winning trades and losing trades to become proficient.
Practicing your trading strategy via paper trading is a great way to implement what you have learned and make necessary adjustments. Most platforms also have playback or an on-demand feature that will allow you to replay previous trading sessions.
When you feel ready, you need to also practice living with small investments. As an options trader, you can do this by trading one contract.
Stay focused on your rules as you practice, and do not risk more capital until you have proven the effectiveness of your plan to be profitable and have more winning trades than losers over a period of time.
By practicing, you will be placing yourself in different scenarios of market conditions. Over time, you will build confidence and know what it feels like to experience profits and losses. Exercising your trading SOP will also shed light on your good and bad personality traits, allowing you to work on your trading psychology.
Trading psychology is a big aspect of becoming one of the successful traders. Dealing with fear, emotional entries, panic selling, and analysis paralysis to mention a few are all situations that need to be addressed so that they don’t interrupt your trade management plans.
Traders gain experience, competence, and expertise by taking the time to exercise and master their craft. Even the top traders take time to practice finessing their skills and ensure their plan in place remains effective in the markets of their trading.
Take the time to practice your trading and train your brain!
Step 3: Patience
After you have your plan determined, and you have practiced, you now need to exercise patience. Have patience with your process and your results.
When you first got on that new bike, it was difficult. You may have fallen or scraped your shin on the pedal too many times to count. Through practice, you improved. You had to be patient during the process and focus on the desire to get better. That patience allowed you to be persistent and persevere. Now, you ride a bike like it is no big deal and even speed up and down the road!
Patience may seem like an easy concept of trading, but despite having a plan and practicing, experienced traders know it is easy to get sidetracked by being impatient and then lose your focus and discipline.
When you feel yourself losing focus, take a moment to breathe in deep breaths.
Remind yourself of why you desire to become a trader.
Let your determination to learn and grow be the motivation you need to drop the fear and become more disciplined.
Calm and conquer your emotions.
Look over your trading SOP and remind yourself to be patient and follow your rules.
When you start trading, no one tells you how disciplined you need to be! Waiting for trade setups can test your patience and adhering to your stop loss and abiding by your risk management parameters can be painful.
Being patient and disciplined though is the sauce! For most traders, it is the difference between winning or losing trades.
Take the emotion out of trading and exercise restraint. Adhere to your trading plan and use the skills you practiced. If you find yourself on a losing streak, go back and analyze your plan and practice again.
To retain your focus in your trading career, always revisit:
Step 1: Your plan.
Step 2: Keep practicing, and then make sure you master.
Step 3: Patience, to achieve optimal trading results.
Summary: Day Trading Mentality
The stock market is unpredictable. Surely there are price charts that depict price action and patterns, market conditions and trends, strategy and indicators, that will help a day trader predict possible future price movements.
Still, every trader will have a bad day, a bad trade, and will lose money in the markets from time to time. The goal is to have more winning than losing trades over a series of entries.
This is why day traders must have a set plan in place and revisit their criteria every trading day to stay focused. Be firm with your trading rules and stay flexible with your expectations and results.
Implement practice to perfect your trading skills, maintain confidence, and control your trading emotions that surface.
Have patience! A successful trader didn’t get where they are overnight! Even the best traders have a bad trade, but know how to regroup and move on to the next trade with focus and the right mindset!
Remember an Old Saying:
“plan your trade, trade your plan”.
To Learn More
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”
Check out this article to improve your trading psychology! Day Trading Psychology.