Are you a trader whose philosophy is “trading to win” or “trading not to lose”? Both have the same meaning but the context is different and will give rise to either a trader making money or losing money. Simple syntax but it works for or against you, like night and day.
A successful trader knows that it is the 3M that determines if his trading plan is workable and profitable. And 3M refers to methodology of how to select a good stock, how to manage the trade monetarily and practicing the right mindset. It is the latter, mindset, that determines 60% whether you feel good about your trading, your results and ultimately profitability.
How does one train the mindset?
1) Be responsible for each decision you make on trading, at each step, be it stock selection, execution or sale. One can usually follow the tips from guru, from forums, newspaper, friends but you must make up your mind and stick to that which works. What works must be backed up with facts i.e. actual trading done or even paper-trading. Usually a written down rule is best since you can update, revise or improve on it later on as your capital, knowledge and risk appetite grows.
2) Think always how to reduce cost of purchase and selling Buy only what your capital and risk money can afford. Know your maximum cap on trading costs and commissions per month or per trade, too much purchase only brings regret of opportunity cost and loss. It does not really translate to profit. Always measure and monitor. Knowing you are a low-cost trader means money saved is money earned. Always review your actual results versus your trading goals and improve your rules on stock selection and stock management.
3) Seek 1 idea to enhance your knowledge. Learn from your own or other’s mistakes and revise trading rules immediately and move on. Back test as necessary. Losing is part of the game and we don’t learn from success but from failures. Same thing we are not aware of our weaknesses from our friends but from our enemies. A successful trader will always learn something and not some things from any experience through reading a book, attending a seminar or surfing the internet. All he wants is an idea, just one, that simplifies all that he needs to learn. After all if you can get only one idea and get to apply it, you earned back what you spent. That’s all. It is like synergy, you put one idea to work and when it works, the other ideas will start coming to you and you grow and grow both in knowledge and wealth. Do not read for reading’s sake; make it a point to pick up just only one idea and you can throw away the book in 5 minutes. That’s a good habit to inculcate.
4) Recharge yourself. If you are in poor health, don’t come to the market. You need all your money just to keep yourself healthy. Trading is serious biz and you must have the time to work out physically and relax spiritually. Then when you are constantly in relax mode, the good vibes will come and your thinking is more receptive to good ideas and you are more inclined to reach out and better still implement them. Therein lies the difference between a successful trader and a burnout out. He’s a N.i.k.e.r(TM) it; he’s acts it out.
Same as in life, the how-to-trade-successfully mindset is like the concept of yin. However it is unseen and unmeasureable but the outcome is visible. Especially when you trade confidently and money is rolling in!