I know this sounds crazy, but it couldn’t be more true! One of the biggest mistakes that developing traders make is having their focus in the wrong place.
Making money is a byproduct of trading effectively — thats where your focus has to be. Focus on trading well, and the money will come. It definitely will not come unless you keep your focus on developing your skills.
As a great man once said, “Bank in the bank, not in your head”.
If you are losing money, sure get upset. For a minute. But don’t wallow in it. Clear the emotion
, move on, and use that energy to refocus. Don’t be one of the large number of traders that are led around by the nose
by their attitudes about losing money, missing out, and leaving money on the table. Don’t let it become personal. When that happens you lose all perspective.
You can tell how concerned you are about money by asking yourself two questions while you are trading that Dr Brett Steenbarger included in a recent post Where Is Your Head When You’re Trading
Are you looking at your profit/loss for the day (week,month) and filtering trades through that?
Are you wanting to get your money back after a loss or hold onto it after a gain?
The other thing to do is watch your thoughts in the morning before the market opens and in the evening after it closes. How often are you thinking about whether you can make $X today, or that you lost $Y dollars today. How often do you get demoralized thinking about how many days its going to take you to make back the $Y.
These are all signs that your focus, whether conscious or not, is in the wrong place. Instead you should be thinking about the market, about the trades you are going to make, about your plan for the day. If you had a losing day, be thinking about the trades you made. What happened? Analyze it.
Once thing that is common with traders that get emotional about losing money is that they tend to avoid examining their trading in detail. The pain of losing is such that they want to change the subject, take their mind off it. Journaling, replaying trades, analyzing in detail what
happened, is too painful. But that’s exactly what you need to do if you are going to cure the problem.
The good news is that it doesn’t need to be a ‘no pain, no gain’ situation. You can easily clear your emotions
, take away the anxiety, so that you can face the analysis that will set you on the right track.
For each trade you made today, or over a recent trading period, make notes about what the market was doing; what you were thinking and feeling; what you did (or didn’t do) in terms of entering, exiting or missing trades; what were the consequences of what you did; what you would do differently next time.
If you can’t answer these questions it means you are not keeping enough records while you are trading. So tomorrow, keep notes, and then try the analysis again at the end of the day.
What the market was doing
What you were thinking and feeling
What you did or didn’t do
What the consequences were of what you did
What you would do differently next time.
If you are feeling resistent to doing this – its even more reason why you need to push yourself to do it. That resistence is your mind/body trying to keep you anaesthatized from the pain/fear of losing. But its the very fog of that emotion that is clouding your trading. Clear the emotion and do the analysis.
The key part of this exercise is taking the things that you say you would do differently next time, and using them to set goals for your trading day tomorrow. This brings conscious awareness to the things that you need to focus on. If you stay focused on your goals, you will
If you do this diligently for a few weeks, and keep doing it, you’ll see a significant improvement in your trading, as you become more aware. And yes eventually, you may even make some money!!
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