In Part 1 of this discussion, I pointed out what I believe leads 90% of traders to their demise: Following other traders and trusting the other traders know better.
Today, I dive into how to actually trust your own trades more. It will require a mental shift, and the payoffs can be enormous.
The number one obstacle most find in picking their own trades is responsibility. You will need to take 100% responsibility for the trade outcome. No longer can you blame your trade alert, the market, the economy or politics.
You, personally, will be responsible from here on out for your profits and losses. It’s not you against the other traders or the markets. It’s you against you. If you can swallow that then read on.
It’s not you against other traders or the markets. It’s you against you.
Stephen Herto
Next, you need to journal every time you exit a trade. The quality of your trading will be based on the quality of questions you ask yourself. Some simple questions I ask:
- What did I do correctly, and what can I do better next time?
- What did I learn from this trade?
I know it’s simple, but so is being a profitable trader. The reason for these simple questions is so you, personally, can figure out what makes you money and what loses money. It’s never the same answer for everyone. You see, your perceptions of market reality are quite different than mine or anyone else’s. Those perceptions shape how you will trade. Understanding how you work internally will change everything about how you trade.
You are likely repeating your performance over and over again — albeit with different tickers — and getting the same results. A review of your trades with the simple questions above will reveal a personal pattern; you may need to adjust to be profitable for the long term.
Finally, I encourage you to think of trading like a business, which involves managing your time and resources like a business. The best way to think of your trading as a business is to create one, of course. From tax loss insurance and having your own small business, the benefits are incredible. Thinking like a business involves planning out your day and time in an efficient manner and maximizing your time to become the best trader you can become. Over time, your confidence will grow as your trading skills expand.
Now is the best time to be a trader. Accept 100% responsibility for your trades. As your skills improve and you get a grip on your own perceptions and delusions of the market based on your personal journaling, so will your account values.
Enuf said.