This single factor which changes the whole trading game

Published date: 29/09/2019
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Alexander Elder, one of the greatest traders in history once said:
“To win in the markets, we need to master three essential components of trading: sound psychology, a logical trading system and an effective risk management plan”

If you read carefully, you can see that Alexander did not name the trading system or the risk management plan first, but rather he began his recommendation with the word: psychology. It took me so long to realise the truth: you can be an outstanding analyst but that doesn't make you a good trader. What makes you a profitable trader is your mind.

Markets are unforgiving and emotional, that's why you must master your mind to be ready for any scenario. To be a disciplined trader, people first need to create rules. Rules will set the guidelines necessary to succeed in this field. Being irrational or emotional cannot be in the equation at all.

Trading is the greatest endeavour any person would ever take, it is not easy as every “Instagrammer” sells it. It is difficult because it requires another level of you. How does your mind mess up your trades? Easy, feelings and actions go hand in hand. In fact, William James used to say:

“Actions seems to follow feeling, but really action and feeling go together and by regulating the action, which is under the more direct control of the will, we can indirectly regulate the feeling, which is not”

Your learning curve must be parabolic and your mental mastery curve needs to be as well. Managing emotions is one of the hardest things someone will do in life, but it is necessary. One powerful recommendation I can give you is to journal what you are feeling each time you enter a trade, that will give you a full picture of your psychology when trading. Also, at the beginning and at the end of the week, you should do yourself  the following questions:

1 - Am I trading with fear?

2 - Am I greedy? 

3 - Am I overtrading during the week? 

4 - Have I defined my Risk-to-Reward ratio before entering the trade?

5 - Am I doing emotional trading or rational trading?

6 - Do I have a risk management strategy? 

7 - Am I following my trading plan each time?

8 - Am I disciplined? 

9 - Am I overthinking the trade too much? Is my trading system simple but effective? 

10 - Am I setting weekly and monthly goals based on PIPs and not in money? 

11- Am I trading for me or am I trading to show it off later? 

12 - Have I mastered patience? 

13 - Am I trying to determine the market direction rather than hearing what the chart is currently communicating to me?

14 - Am I assuming what will happen in the market instead of sticking to the facts?

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Comments

  • This single factor which changes the whole trading game
    Mohamed Abdo says:
    02/10/2019

    You hit the nail on the head

  • This single factor which changes the whole trading game
    ASTRO FOR LIFE says:
    30/09/2019

    Thank youuuuuuuuuu!!!!

  • This single factor which changes the whole trading game
    Jasmine says:
    30/09/2019

    Great to see some quality work, unlike other sites which chat rubbish

  • This single factor which changes the whole trading game
    Kath says:
    30/09/2019

    Thank you soo much for sharing your thoughts and ideas, if you could keep this going, I love reading them on the weekend so I can implement all these into my own trading and journalling!

  • This single factor which changes the whole trading game
    James L says:
    30/09/2019

    Great article once again! Loved reading this!

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