The Dangers of Trader Mindset Loop

Reading Time - 7 Minutes

 

Hello Traders.

Today I want to go over something that really destroys a lot of beginners. I’m also going to tell you exactly how I got over it and how I still deal with it today.

First thing is first – trading is BORING. I hate to pop your bubble, but there is no excitement in the trading industry. For the vast majority of the time, you’re simply waiting with nothing to do. It is also frustrating in that you can sit around waiting all day and then a trade can trigger from your zone that you completely miss. That’s trading. You will win, you will lose, and at the end of it all, your aim is simply to be in profit.

So what happens with a lot of people is they get into the ‘trading mindset loop.’ Yes, I made that phrase up, but it’s exactly what happens. Let me break down what might happen in a typical trading day with a beginner:

8am – Watching the charts

9am – Watching the charts

10am – Watching the charts

11am – Watching the charts

Now the boredom and frustration really starts.

1pm – The market reaches an identified zone.

1:30pm – There are no clear signals. It doesn’t quite fit all of your rules but it’s very close and you’ve been sitting here all day. You don’t want to miss it. You jump on the trade.

1:45pm – The market has moved against you. You panic. The market will turn around. Just this one time it will reverse and let you get out at break even.

2pm – It drops back to break even with a strong candle. You knew you were in the right position. You decide to hold.

2:15pm – The market has moved against you. It hits your stop.

Mindset – The market is to blame. It just wasn’t playing the game today. You made a small mistake but that’s ok, you wont do it again.

This happens over and over again. People blow accounts like this and then when the account is gone they are still facing external and blaming the world. The market screwed them. The trading system was no good. The broker took their money.

Blah. Blah. Blah.

The reality is that the only person to blame for losing money is, sadly, you. I’ve been there and I had to face that reality. It’s very tough. But you control your trading and you are the one who ultimately pulls the trigger. If you’re suffering losses, you need to face that fact.

Now let me state that if I was watching the charts all day, I would likely fall back into the habit of making the same mistakes. It was something I noticed that I did and I corrected it. Let me show you how that same day would play out for me now:

8am – Not watching the charts

9am – Not watching the charts

10am – Not watching the charts

11am – Not watching the charts

1pm – My pre-set alarm signals. I go to my computer and look at the chart. It is very close to my zone. I run through my checklist before any signal appears. Is EVERYTHING aligned correctly? Not 70% or 80% but 100% aligned. All looks good. I check the chart every 5 minutes for a signal. None come. One gets very close, but does not quite fit my rules. I ignore the trade.

2:15pm – My account is still exactly the same. I have not lost any money. I have not made any money. My capital is protected.

I do this all the time. I pass up on trades that DO work nicely. I do it because I know that over the long term, being selective works. I don’t care about making points on a Monday or a Tuesday or a Wednesday. I care about living as a full time trader. And that’s exactly what I do.

I scratched out a zone that ended up working very well – I don’t care. My capital is protected.

It wasn’t quite a signal but the market then rallied 50 points! – I don’t care. My capital is protected.

That looks like a Head and Shoulders pattern. I don’t trade those but wow this one is good – I don’t care. My capital is protected.

This is the mindset you absolutely MUST develop to become a successful trader. Do you think someone working for a bank with millions at their disposal takes a trade that is ‘almost’ perfect? Of course they don’t! They would be out of a job in a matter of days.

The most dangerous thing that can happen to retail traders is that sometimes breaking the rules work. There is no management there to reprimand you and all you see is the profit. You build bad habits this way and instead of getting fired you eventually lose all of your money. This is the reality for 90% of retail traders. I’m not trying to be morose and put a damper on your journey, but this is something that needs to be taken to heart and learned.

I figured out that watching the screens was the major problem for me. It actually surfaced again when I dipped my toe into live room trading. I was at my screen. I was letting the trader mindset loop take over. Your issues may be different, but you need to find out what they are. Stop blaming the market and stop blaming the system (unless the system is genuinely a con!). The problem is internal. As soon as you face that and start to correct it, you will become a better trader and you will see the results begin to work in your favour.

I set alarms on the chart. I do not watch the market until those alarms trigger. When they do trigger, I have checklists pinned to my wall. I’ve been doing this for years now and I still run through those checklists before a trade. I read them, even though I have them to memory. I read them because it makes me look away from the chart and consider each one without the market in the picture.

The mistakes won’t correct themselves no matter how much you convince yourself you ‘wont do it again.’ If you want to succeed and be a profitable trader, find your problems and work at every one of them so you can manage them all.

Don't be one of the 90% who feed the market!

I hope you’ve all had a great trading week!

FTSE 100 Review + Opportunities + A RANT 29th March

Wednesday Quote Hour

Studying for my Open Water + Working. The Long Weekend is Officially Over!

FTSE 100 Summary and Analysis 27th March

How To Identify And Trade Double Tops and Double Bottoms - For Beginners

Tough Times Come To Us All

 Reading Time - 4 Minutes

Tough times come in trading. They come in life. They cannot be avoided.

What a morbid start to a blog post, right?

But it is true and if you can accept that it is true, and has always been true, then you can focus on the other side of the tough times, on the emergence from them as a better, stronger person.

Now this is a trading blog, so I am going to focus on trading, but as mentioned, this relates to all aspects of life. For trading, tough times can be summed up fairly simply – they are either strings of losses, when nothing seems to be going right and you want to give up, or they come after runs of mistakes (which usually also include losses) where you feel like it’s an impossible task and you’ll never be able to achieve your goal of becoming a competent, profitable trader.

The first thing to point out is that it’s normal. You are not the only one to feel this way and to struggle, nor will you be the last. In trading especially, I see it all the time, and I have been there more times than I care to remember. Even now, after a string of losses I still feel my head dipping and that little voice of doubt and self-criticism speak up. I can let you in on a secret – every trader feels the same way. Those who have been doing it for ten years and those who have been doing it for ten months. It doesn’t go away; we simply learn to manage it.

When things are really getting tough and you can’t seem to figure a way forward, the danger is that you let it snowball. That fear of making mistakes and losing money ironically leads you to take more risks and lose more money!

Trading is difficult. I don’t care what all of the ‘gurus’ tell you on their shiny YouTube video adverts. It IS difficult. You are dealing with uncertainty on a daily basis. Humans don’t like uncertainty and our mind jumps into fight or flight mode. Great when we are in danger, but not so much when we are trying to take an unbiased view on the market.

So when times are tough what should you do? Well, first of all, think back to a time when you felt this same way. When everything seemed like it was crumbling around you and you could never move forward. And look at you now. Since you’re reading this, I know you survived it. And what’s more, I bet looking back on it now, it seems to have blurred around the edges and doesn’t seem quite as insurmountable as it did.

When it comes to trading, after the hard work has been put in to learn the methods, you need – MUST – turn the focus inward if you want to succeed. Anything and everything that can help you remain calm under pressure should be studied. I don’t care if that means you sit on the floor chiming bells between your fingers and chanting for an hour a day. If it works, it will help you improve and it will show you a little bit of light that you can head toward.

Everyone struggles. Only you can take the steps necessary to come out the other side.

I hope you’ve all had a great trading week! And I hope any Irish readers have a great Paddy’s day!

FTSE 100 Review + Opportunities + Results 15th March

Wednesday Quote Hour

Coming Soon At Decisive Trading

Hello Traders.

Today’s blog post is more of a look at what I have in store for Decisive Trading in the coming weeks and months. There are some exciting things happening!

YouTube – As well as the continual updates I post to YouTube each week (mainly the FTSE 100 Reviews), I am working on some new material for beginners/intermediates. The series will go over how to identify and trade patterns. The first video will cover double tops and double bottoms and I am working on a video for head and shoulders patterns also. I will also look at ‘squeeze’ style patterns like triangles.

Interview Series – This is something I am still working on and hope to bring to you all very soon. I will be attempting to interview successful traders, putting to them the questions I feel can really help everyone identify ways to progress with their trading. If you have any question ideas, please post them so I know what you want to know.

On top of that I am working very hard to secure an interview with Owen Fitzpatrick, who is a leading expert in Psychology, a best selling author and world renowned for his skills in the field of influence. I go on a lot about how important it is to work on your psychology when trading, so what better way to help than have one of the best in the business give you some hints and tips?

Seminars – I get asked about seminars a lot. This is something I am looking at but in all honesty, I don’t have a definite course forward on this one yet. But rest assured I’m looking into it and trying to figure out the best way to help/offer something I think is worthwhile.

I hope you all have a great trading week!

FTSE 100 Review + Opportunities 8th March. Down Day!

A down day for me on the FTSE 100 on the 8th of March. Yes, they happen and are all part of the trading business. The difference with me is that unlike most 'traders' out there, I don't mind showing you the truth! Happy Trading!

Wednesday Quote Hour

My New Decisive Trading Additions Arrived Today!

Daily Goals

Reading Time - 5 Minutes

Setting daily goals is a great way to improve not only at trading, but at anything you tackle in your life. As Richard Branson said:

 ‘’Every success story is a tale of constant adaptation, revision and change.’’

For me, that means you should never grow comfortable or complacent where you are. The world and life are constantly changing, so you should be ready and able to adapt when needed.

Let me give you some back-story to when I was learning how to trade. This was probably in the first month or two of live trading (there had been lots of preparation and learning before this). Back then I was trading the Dow Jones on either the 5 minute timeframe or the 1 minute timeframe… I have no idea how I managed to trade the Dow on the 1 minute timeframe!

So anyway, I thought I had developed a couple of good strategies. One was basically plotting a support line and a resistance line on the 5 minute timeframe and trading in between them. The other used Stochastics for locating reversal areas. Back then I was certain that to be a master trader you needed to either 1) use fancy indicators (so your chart looked something like the image below), or 2) have a secret system that only you knew about.

The stochastic system worked best and I believe I had three days of profit with that one… and then we hit a major trending day and all hell broke loose. Needless to say, I lost all of my previous gains… and then some!

The support and resistance trading was similarly flawed. I was trying to trade within 10 – 15 point areas on the Dow Jones and wondering why I would go through stages of losing lots of trades! It didn’t make sense. Didn't the market understand that support and resistance areas were to be respected? Did the market not understand that I had found the top secret method for success in trading?!

The point of these examples is to show how easily it is to fall into the trap of believing you ‘get it’.  At the time, I thought I knew all there was to know about trading. I had read perhaps twenty trading books, watched all of the content online I could find and had been studying charts, learning how to identify candlesticks, and support and resistance. In my mind I knew what I was doing.

And there is the dangerous phrase!

‘In my mind I knew what I was doing.’

Now, it doesn’t matter that I was a beginner back then. The same holds true for traders or people of any industry, no matter how long they have been at it. Just look at some of the largest banks in the world. Those places are filled with what are supposed to be the best minds in the industry and people who ‘know what they’re doing.’ And yet look at the trouble they ended up in because they took on too much risk and quite frankly, DIDN'T know what they were doing. Or take hedge funds managed by top traders, the best in the business – how many of those have failed spectacularly?

No one ever ‘knows it all’, or is good enough to rest on their laurels and go into auto-pilot mode. For that reason, you should always be trying to improve, pinpointing your weaknesses so you can correct them, and challenging yourself.

So how do you do this in the trading field? 

This goes for beginners and experts alike…

Simply set yourself daily goals. Not monetary goals – I will make 2% today. Or I will have 3 winning trades today. Those are the wrong kinds of goals.

Think of things that address your weaknesses.

-       Today I will not enter any trades that do not fit my trading plan.

-      Today I will make sure I do not increase risk to try and make back earlier losses.

-       Today I will focus on my inner talk and work on quieting the negativity whilst I am in trades.

-       Today I will not exit trades that move against me until I am certain the decision is logical and not emotional.

The list is literally endless. And each day, if you reached your goal the previous day, change your goal. As you work through the countless variations and possibilities, you will begin to improve. This is because you are making a conscious effort to address every aspect of your trading, as well as identifying things that are troubling you. The more you think about identifying areas where you could improve, the more you become adept at identifying them.

And you can revisit goals over and over again. Maybe you have a great week of only taking trades that fit your trading plan but then suddenly you have a bad day. The next trading day your goal can once again be ‘Today I will not enter any trades that do not fit my trading plan.’ Because no one is ever perfect, at anything. But the best are always trying to improve.

I write each goal down on post-it notes that I keep by my computer. Today’s goal was to look at Tick charts and see if they can offer me any advanced signals for entry.

The thinking of the goal... which leads to the writing of the goal... which leads to the focus on the goal for the day... which leads to definite actions to achieve the goal… I’m sure you can see where the benefits comes in! And best of all, if you’re thinking of new goals every day, there is no risk of you ever becoming complacent.

I hope you’ve all had a great trading week!

FTSE 100 Review + Opportunities + Results 1st March

Wednesday Quote Hour