The proper mindset is crucial for achieving your trading goals. Without it, success remains elusive. To become truly successful, you must take control of the thoughts in your mind. Dwelling on negativity and letting fear dominate your thinking will only lead you astray.
This article aims to provide you with a powerful tool to begin each trading day with the right mindset. As I have emphasized before, your mindset plays a pivotal role in your trading success. If your mental state is not aligned, making money from trading becomes impossibility.
The objective here is to steer your thoughts toward positivity and self-confidence. What you focus on and how you think directly influence your life outcomes. Every successful trader firmly believed in their abilities before attaining success. Therefore, you must actively cultivate a positive mental environment to excel in trading, and this lesson will guide you toward that goal.
The Power of Affirmations
According to the website learnmindpower.com:
When you verbalize something and repeat it to yourself, it will influence your thoughts. This is why affirmations are successful. If you say to yourself, “I will have a great interview”, you will automatically begin thinking about your upcoming interview as a great interview. What you focus on, you attract so begin using affirmations to focus on what you desire.
There are three rules to remember when using affirmations:
1. Always affirm the positive.
Avoid asking yourself, “What if it’s a terrible interview?” or thinking things like, “I’m so nervous”. These statements focus on the opposite of what you want. Be positive, and use words that reflect what you want to happen. If you want to be confident, use that word in your affirmation.
2. Make your affirmations short and simple.
Use a short phrase, or one sentence at the most. Your affirmation should be like a simple mantra that you can repeat over and over again, without thinking.
3. Don’t force yourself to believe it. Just say it.
You don’t need to force yourself to believe your affirmation, simply repeat it over and over and it will naturally have an effect on you. Repeating the statement many times will cause it to work for you.
Affirmations are simple, easy to use, and very powerful. Many professional athletes use them to perform well. Successful business people use them to close deals and run their businesses, and artists use them to be creative and come up with innovative ideas. You can use them too, in any area of your life.
Now that you comprehend the effectiveness of affirmations and the simple principles for utilizing them, let’s explore ten trading affirmations that will not only set the right tone for your trading day but also help you foster a consistently profitable trading mindset.
1. “The Key to Market Success Lies in My Mindset and Mental Skills”
Every day, it is crucial to remind yourself of the paramount importance of your trading mindset when it comes to your performance in the market. Mark Douglas, a respected trading educator, emphasized that even if you possess a high-probability trading method, it is the proper execution of that method that requires strong mental skills. Without these skills, even a winning strategy will result in losses.
2. “Embrace the Mindset of a Successful Trader”
Building upon the foundation of positive thinking and adopting a “fake it till you make it” mentality, it is essential to truly believe in your heart that you will become a successful trader—a true “baller.” To achieve something, you must first prime your mind to believe in it, as your mind guides your actions. When your mind is convinced of your capabilities, it will direct your behavior towards transforming those beliefs into actions, ultimately forming the habits necessary for consistently profitable trading.
3. “Trading Involves Probabilities, Not Certainties”
It is common for many traders to fall into the trap of believing that every trade will be a winner, disregarding the fact that a 100% win rate is impossible. It is crucial to remind yourself that losses are inevitable. This awareness prevents overconfidence and the potential pitfalls of risking too much or engaging in excessive trading. Trading is a game of probabilities, not certainties. For instance, even if you have a 75% success rate, it means you will experience losses 25% of the time. The challenge lies in not knowing which trades will fall within the 75% of winners and which will fall within the 25% of losers. Additionally, it means that you could potentially encounter a streak of 25 consecutive losing trades out of 100. Although unlikely, this possibility underscores the importance of approaching risk management.
Will you manage your risk assuming every trade will be a winner? Or will you adopt a realistic approach and remain neutral about the outcome of each individual trade? If you choose the latter, it necessitates reducing your risk per trade to an amount you can afford to lose multiple times in a row without suffering emotional or financial harm. Remember, trade outcomes are randomly distributed, and if you are unfamiliar with this concept, please refer to the provided link for further clarification.
4. “I Always Implement a Stop Loss to Safeguard My Capital”
First and foremost, it is imperative to consistently utilize a stop loss for every trade. One substantial adverse movement without a stop loss in place can devastate your account. Therefore, accept the fact that you must always employ a stop loss.
Secondly, it is essential to understand how to appropriately set stop losses. Here is a quote about stop losses from one of the trading legends Bruce Kovner:
“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.” – Bruce Kovner
5. “I Recognize the Importance of Taking Profits and Acting Accordingly”
Although it may seem counterintuitive, it is crucial to remind yourself of the need to take profits. Many traders fall into the trap of holding onto their trades until they turn into losses. Frequently, traders lack a logical exit strategy and end up holding positions for excessive durations.
During the initial stages, it is advisable to aim for 1:1 risk-to-reward ratios instead of constantly holding out for substantial profits. This approach not only helps in building your trading account by achieving more winning trades but also fosters confidence in your abilities and the trading method you employ. Additionally, it provides a comprehensive overview of the accuracy of your trading edge (entry strategy) across a significant number of trades.
6. “I Remain Unaffected by News and External ‘Noise'”
Fundamentals and market news events are typically unproductive distractions that consume valuable time and energy. They often lead to over-analysis, unnecessary complexities, and ultimately, financial losses. But, you don’t have to take just my word for it; here is what trading legend Ed Seykota has to say about fundamentals:
“Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”.
I am primarily a trend trader with touches of hunches based on about twenty years of experience. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in a very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.” – Trading legend Ed Seykota
7. “I Allow the Market to Function on Its Own, Avoiding Unnecessary Interference in My Trades”
The market exhibits various movements—upward, downward, and sideways—and it is your responsibility to identify high-probability entry and logical exit points. What transpires between the entry and exit stages typically distinguishes successful traders from the masses of unsuccessful ones. Rather than needlessly meddling in their trades, successful traders allow the market to operate independently.
Once you enter a trade, let the market follow its course. Avoid incessantly staring at charts, hoping to exert control over price movements in your favor. Your role is to interpret price action and identify potential entries that may yield profits. However, attempting to manipulate the market, which is beyond your control, will only lead to financial losses.
8. “I Commit to Being a Professional Trader, Not a Professional Gambler”
Will you choose to be a gambler or a trader? Gamblers engage in games of chance, understanding that their decisions are not based on skill or high-probability outcomes. They lack planned approaches or methods. It may be tempting to impulsively click the mouse, enter trades, and experience the adrenaline rush that makes you feel alive, akin to a gambler. However, such behavior does not pave the way for long-term success in the markets. I urge you to prioritize learning an effective trading approach and developing it into a comprehensive trading plan. By doing so, you can transform yourself into a disciplined, skilled trader rather than a random gambler lacking direction.
9. “Trading Can Be Simplified and Streamlined, and I Will Embrace Simplicity”
Trading does not have to be convoluted or arduous, although many individuals tend to complicate it unnecessarily. It is important to remind yourself that trading can be straightforward and effortless. The first step is to learn a simple yet effective trading method, such as price action. When it comes to technical analysis, all you truly need is an understanding of price action, trends, and levels, or T.L.S—Trend, Level, and Signal.
You do not require cluttered indicators or intricate charts. Nor do you need to engage in convoluted thinking involving fundamentals or news. All you need is your own mind, a grasp of T.L.S, proficiency in money management, and an understanding of trading psychology.
10. “Trading Success Relies Not on Luck or Intelligence Alone”
Here is a good quote from The Turtle Traders co-founder, William Eckhardt on intelligence in relation to trading success:
“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstandingly intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.” – William Eckhardt
“In conducting the interviews for this book and its predecessor, Market Wizards, I became absolutely convinced that winning in the markets is a matter of skill and discipline, not luck. The magnitude and consistency of the winning track records compiled by many of those I interviewed simply defy chance.” – Jack D. Schwager
If there is one essential trait that determines trading success more than any other, it is persistence. While not everyone will achieve success in trading, persistence is a common characteristic among those who do. You must possess unwavering belief in your aspirations and translate that belief into action, which in turn becomes ingrained as habits. By doing so, you will embark on the path toward becoming a professional trader.