If you are thinking or behaving in an undisciplined or unorganized way when you are not trading, you will trade in an undisciplined and unorganized manner.
Without discipline and rigorous attention to detail, you will not be able to trade successfully.
This is also true if your personal life and relationships are not going well, because you will be unable to give complete focus to your trading — and you will fail.
If you spend a lot of time daydreaming about making a financial "killing" that will take you away from your internal suffering, you are trading on hope and you will fail. Take the time you spend daydreaming and turn it into something which will make you stronger, such as rigorous exercise, yoga, meditation, centering and clean, healthy eating.
This is a marathon, not a sprint, and it takes strength, endurance and good health to stay the course and win the race.
If you are depressed, anxious, hypomanic, hung over or rely on substances to alleviate your anxiety or medicate your feelings, you are in a situation where your brain chemistry is altered to the point where you cannot make logical trading decisions.
If you do not feel good about yourself, if you lack self-confidence and balanced brain chemistry, you set yourself up to lose. This is not a conscious decision, and you might be reluctant to admit this to yourself. However, when you are in these brain states, you will do things to punish yourself just to re-affirm that you really are worthless and deserve to suffer. The unconscious desire to fail is every bit as powerful as the conscious desire to succeed. Stay in touch with that dichotomy at all times, and you will see a side of yourself that you never knew existed.
Treat each trade as a possible winner or a possible loser.
There is absolutely no such thing as a "sure thing" in trading. Trading is a game of probabilities, and the goal is to make more than you lose. If you are in a strait jacket of perfectionism where everything has to work all the time, and you have to get just the bottom or just the top, and you cannot tolerate even one downtick, let alone a drawdown, then you are not suited to be a trader. The first article I ever wrote for www.thetradingdoctor.com was called “Addiction To Perfection.” Good traders know that you only get one opportunity in your life (if you are inordinately lucky) to pick the exact bottom or the exact top of traded entity. Strive for moderation and balance and eschew perfectionism, as it is one of your greatest enemies.
Never make a trade in a market that just completed a major move if the only reason for making the trade is that you just saw a major move and missed it. Do not chase and always let price come to you. The market offers opportunity every day, but most are blinded by it because Ms Market is a harsh and demanding mistress, and does what she can to deceive, seduce, unbalance and punish you.
Winning traders and losing traders experience the trading environment differently.
In psychological terms, they interpret the market differently because they have a separate belief system in the way that they see themselves relative to the stock market. Change your belief system from the reactionary emotional beliefs of most losing traders to the more proactive unemotional approach of a successful trader.
Know when NOT to trade. This skill is just as important as knowing when to pull the trigger. Part of being a great trader is being a keen observer of whatever it is you are trading. Allow your brain and eyes to soften, and become a distant objective observer, rather than a hyperactive reactor. By committing to observe objectively, you give yourself permission not to trade until the conditions are right.
Don't trade for excitement or entertainment. Avoid the highs that come from quick profits or the lows that can appear after losses. If you have a sound system, it does not matter whether any particular trade makes a profit or a loss. What matters is that the probabilities over time are in your favor. You must remember that no system is perfect, and prepare for losses along the way. You should measure yourself on whether you followed your rules and executed your system, for both winning and losing trades. The process of trading is much easier when you focus on execution of a system rather than on whether each individual trade was right or not, because you take your ego out of the process.
Protect your psychological capital by not overtrading or playing for excitement instead of profits. This can cause you to be emotionally "drawn down", and sit there in exhaustion and despair, usually as a move just begins that could have been a big opportunity. You miss the new big trend because you were financially and emotionally eroded by overtrading in a tough market. As a result, you can't see through the negative emotions because you feel beat up by the markets. Managing your internal psychological state of mind is just as important as managing your financial position.
Be careful not to overreact to intraday news and the endless stream of cacophony which comes to you through your eyes and ears every day. The more you listen to the litany of infotainment, the more your brain sets you up for whipsaw. Make preparations for each day's trading in advance after the previous day's close, so that you have some idea what the market structure looks like heading into the next trading day. This allows you to move from a reactionary state to a more proactive posture, and position your mindset to capitalize on news-driven intraday volatility. Ignore 99% of what you see and hear during the day, and focus on your positions and your trading plan.
Accept total responsibility for the results of your trading. Even if you authorized someone else to trade on your behalf, or took the recommendation of someone, it was you who made this decision. Losers always look for somebody else to blame. Winners look to themselves because they know that all the answers are within. Who can you truly and only control? YOU.
If you are not in constant attention to the small still voice inside of you that keeps you centered and in the present, you will always feel the most fearful when you should be the most greedy and vice versa. If you are watching every tick, hanging on every piece of news and noise that comes to you through the media, fibrillating on a minute to minute basis between fear and greed, in a state that you cannot sleep or are in terror, or so elated that you know your position will just keep going up and up, then you really need to get a grip and get over yourself.
Consistently good trading begins and ends with you.
Every moment in the market is unique. Allow yourself to feel that without struggle. Give yourself permission to go with the flow rather than fight it. Know that you have the power to chose, and take total personal responsibility for these choices. Always remember to approach the markets with respect and humility. Remain in gratitude for any gifts you receive from them. You have the power to be a consistently profitable trader if you get right with yourself, go with the flow, stay centered and take total responsibility for your thoughts, beliefs and actions.
It is my daily mood that makes the weather. I possess tremendous power to make life miserable or joyous. I can be a tool of torture of an instrument of inspiration. I can humiliate or humor, hurt or heal. In all situations it is my response that decides whether a crisis is escalated or de-escalated, and a person is humanized or dehumanized… Johann Wolfgang von Goethe
Dr. Janice Dorn is the only Ph.D. (Brain Anatomist) and M.D. (Board-Certified Psychiatrist and Addiction Psychiatrist) in the world who actively trades, writes commentary on the financial markets and manages a subscription-based website. Dr. Dorn has been trading the gold futures markets full time since 1993. She has written over 1000 articles on trader and investor psychology, and mentored over 600 traders and investors.She writes on all aspects of trading psychology and provides a real-time trading service on her website: TheTradingDoctor.com.