Many traders have the following trading mentality: A good trading day is a day where they win a lot of money. This seems logical. “I’ve won money and I feel really good, so, yeah, it’s a good trading day.” The good feelings that go with making money seem to tacitly confirm that the day was a good day. But this isn’t a constructive way to think.
What happens on a day that trades within a narrow range and you are unable to make a good trade? Is it a “bad day” because you didn’t make a lot of money? Could it be a “good day” because you kept yourself from getting chopped up?
Trading Mentality: The Successful Trader’s Focus
Successful traders have a different trading mentality. They will feel good about making a lot of money, but they won’t let those pleasant feelings guide their focus and attention. They know they can’t control how much money is made on a given day or how the market will trade. They know that placing their focus on results is like investing in fool’s gold. There is no real value there.
So where do they place their focus? Successful traders always place their focus on their trading process, never on their trading results.
Trading Mentality: Why Process is so Important
In any probabilistic endeavor like trading, we want to aim our concentration at our process and not be overly focused on results. As long as we have an edge, it is by attending to our process that our edge will play out. Let’s say we have a trade setup that produces a 65%-win rate. We put ourselves in the best position of realizing that win rate over many trades by paying attention to the process of trading that setup—identifying when it occurs, finding the entry, setting the proper stop, setting the profit objective, managing the trade and taking profits at the target. This is the right trading mentality.
Trading Mentality: Process is More than the Individual Trade
The trading process goes beyond the procedures used in trading your individual trade setups. It is here where the successful trader shines and places her trading in the best possible position for capitalizing on her edge. Let’s look at what this entails.
High Quality Preparation
Each night, the process-savvy trader will review their market’s recent trading and make a game plan for the next day. The game plan may include things such as key support and resistance levels, trend lines, important indicator readings, and other elements that support the trader’s trading and decision-making. The smart trader may also identify where trades may set up the next day and have a mental map of what must happen for those trades to set up and work.
This is preparation. High quality preparation is a crucial component of the trading process. The better our preparation, the better our trading is likely to be. Notice that results aren’t a factor here. High quality preparation will help produce better trading and better trading should, in turn, produce better trading outcomes.
Effective Execution
While we are trading, our focus is on effective execution. We are reading the market and our indicators, looking for trades to set up. Once a trade sets up, we then look for the entry, set our stop and manage the trade to its conclusion. Notice that our focus isn’t on making money, it’s on the process of executing our trades. Notice, too, that we aren’t looking to locate higher time frame support in the middle of trading. That’s already been taken care of by our process of high quality preparation.
Constructive Self-Assessment
After the trading day is over, our process continues. Now, we evaluate how the market traded, noting anything we can learn for future trading. We also engage in a constructive self-assessment of how we acted during the trading day. What did we do well and where did we fall short? Is there anything we can do better and what specific steps can we take to better our trading? Constructive assessment will help inform our preparation and execution and help us develop into better traders.
Aiming our attention day after day to our trading process—high quality preparation, effective execution and constructive self-assessment—is the best way to improve our trading. Again, this is the right trading mentality: Focus on the things we can control and make a difference in our trading, not on the fool’s gold of results.
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