Three Simple Tips to Help With the Trading Psychology and the Trader Mindset

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Trading psychology is what holds most people back from becoming a successful trader. It is more important than the trading system you use, it is more important than the live room you’re a member of and the ‘guru’ showing you how much money he makes without ever really helping you to advance your own skillset.

Now, there is no way to ‘quick fix’ the psychology issues (although I’m sure the aforementioned ‘gurus’ will assure you they can if you just slip them your credit card number). Unfortunately, we are emotional beings, hardwired with the fight/flight/freeze response and a brain that likes to play it overly cautious. It thinks it’s helping you to survive a wolf attack, and it can’t distinguish the difference between that attack and the fear of losing money (vital for survival) in a trade.

However, there are a few simple ways that can help you along the way, and they’re things that I still use to this day.

So, here are my three top tips for helping improve your Trader Mindset and Psychology when trading.

1 – Cover Your Position

This is incredibly simple, but it is also very effective. When you get into a trade, there’s the open position box to the left of the screen. It flickers between positive and minus, showing you how your trade is doing. The problem with it is that we have a tendency to focus on that little box, rather than the market. The box shows us if we are +7 or +15 or -16 etc. Our minds naturally calculate what that means in a monetary sense and we start thinking about how much we are making or losing.

I’m sure you’ve all had experiences similar to this – Your trade drops down and you are sitting at
+12.7 points. You decide to wait for +15 before you exit. The trade then moves against you and stops you out. Or, let’s say the trade is moving against you and you see on your screen that it reads -3 points. It’s so close to break-even that you decide to wait for the market to get back there so you can exit without losing money. Of course, the market instead moves away and stops you out.

What you are doing is basing a trade off of one thing and one thing only – money. You are no longer using the market (the big thing you’re trading!) to make your decisions. All you are doing is hoping for an outcome. When the market is telling you that +12.7 points is a key level of support and you should exit, you’re thinking about that +15 and just blindly holding for the profit.

It’s really simple to combat. Just cover that portion of your screen. Either extend the window so that it is off of the screen, or else you can even run a strip of masking tape down there to hide it from view. You will notice that without that visual reference, you instead focus on the market and price action, which is exactly what you should be doing.

2 – Stop Checking Your Balance Every Day

Again, this is a simple fix for a common problem. A lot of traders look at their account balance after every trade or every day. This is a problem because again, they start setting themselves targets based completely on ‘hopes and dreams’ rather than the market. Let’s say by Wednesday you have made £770. Your mind suddenly chirps up, ok, just another couple of small trades and I can make £1000. What happens is that whilst on the charts you are no longer waiting for the perfect setup but are instead looking for them and finding reasons to get in so you can make that money.

What happens as a result? You take an imperfect trade which results in a loss. Now you’re properly pi**ed off with yourself, so you attack the market and try and make the money back.

When trading, you should be focusing as much as possible on the market and not the money. There should be no additional reasoning for taking a trade – ‘I want to make more money this week’, or ‘I’ve had a loss this week that I want to clear out’. That type of thinking is a recipe for disaster.

The fix is very easy – stop checking your balance so often! Now, when I log into my broker it brings up a window with my balance displayed. However, it is displayed on the left and the button to launch Pro Real Time is on the right. So, all I do is focus on the right of the screen, hit the button and then close the window.

3 – Realise You’ll Never ‘Make It’ as a Trader

Now we are onto the final point. And don’t baulk at the title, because it isn’t as bad as it sounds.

Most people I speak to and work with have a belief when they come to trading that they will one day ‘become’ a trader. And by that, I mean that all of the emotional responses will disappear. They will have such a clear view of the market that they are able to just log on, pull out money and then go on about their day in a blissful Nirvana.

This is a big problem, because the longer they learn trading and come to understand that they aren’t developing in such a way, the more they start to beat themselves up. They think they should be ‘better’ and when they’re still panicked in a trade it seems like a failure and they believe they’ll never make it.

That is most definitely not the case. The market will always be an arena of uncertainty. You will never be able to win all of your trades. You will still make mistakes as a professional. And the emotional responses will still spark into life when you’re in trades.

The only difference is that as you progress, you learn to deal with it all and mostly ignore it.

Once you accept this and understand it, then learning to trade becomes simply a process of try try and try again, all the while focusing on correcting mistakes and building your discipline.

You think I never want to throw my laptop through my window after a tough week of trading? Of course I do! But I also realise that trading is like riding in a boat, where sometimes you’re up and sometimes you’re down as you follow the waves. So, I am able to walk away and come back the next day ready to go again and again and again.

Understand that you’ll never ‘make it’ and instead work on repeating a process over and over again no matter how you feel. That is the way to becoming a professional trader.

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

James Orr