Nothing in trading is as important as your mindset… The psychological aspect of trading is extremely important and so often overlooked.

As a trader, you are dealing with money and there are only a few things in this world that carry heavier feelings than that.

Therefore it’s very easy to get caught up in the emotions related to making and losing money.

These are very real and powerful emotions that can wreak havoc on your P&L.

I went through the emotional grind of losing when I got started trading…and even now, I still have to deal with losses and losing streaks.

Every trader does…no matter how successful they have become.

So how do I keep from letting it affect my trading, as well as my personal life?

It all comes down to having the proper mindset.


The Power of the Mind


Your thoughts have a powerful influence on your life, and most of us go through life neglecting this force.

If you lack confidence or are pessimistic—it will reflect in your performance, in my opinion.

If you want to be the best version of yourself, then you can’t neglect the mental game and how it impacts your trading.

All too often when a trader goes on a losing streak… the momentum of the losses are what cause it to become a streak… Why? Because it’s in their mind…

The more losing trades, the more they are focused on losing and the mind just carries it forward…

How does this happen?

Well, directing your thoughts towards a desired outcome propels you towards that outcome… so if you are focused on failure, you attract failure… and in the midst of a losing streak, you can subconsciously be focused on losing… simply out of fear…

Thus, the key is to focus on success with a winning mindset and let your trades play out, win or lose, according to your plan.

Losses happen… Bad trades happen… that’s part of the game, so you have to be mentally prepared for that or you will find yourself in the midst of a losing streak.

A streak that will likely keep you from ever making money… you’ll make it and then you’ll lose it… constantly breaking even, or worse…blowing your account up.

To keep my mind right, I have worked out the emotions related to trading… the primary emotions being fear and greed…

Understanding them can go a long way to overcoming them.




So what is fear?

It’s simply a painful agitation in the presence or anticipation of danger.

When it comes to trading, the key word here is anticipation. I am not in any real danger when trading…other than the danger of losing money…sort of…

You see, if I follow my strategy I know when to take a loss and move on…a loss I accepted before I entered the trade.

It’s the anticipation of losing that creates fear in trading…not the actual loss itself.

This anticipation often leads to anxiety and loss of confidence…

Which then keeps us from taking on the next trade no matter how well it fits our criteria. So the reaction and steps we take to keep from losing money… are actually causing worse damage.




Bulls and Bears make money, but pigs get slaughtered. This adage refers to greedy investors trying to squeeze the last dime out of an investment, only to see it disappear completely.

We live in a competitive society based on financial insecurity. Thus people become greedy when it comes to money…at least to some extent.

That’s why no matter how much money we have in our bank account, we are never fully satisfied. We worry it might run out one day, so we constantly strive for more…

What if a major accident happens, or a financial collapse? Most people want to retire knowing they will have enough to survive…and sometimes, we simply want to compete and do better than the people around us.

Whatever it is…greed can be devastating to trading because it keeps you from taking profits and in the end the pigs get slaughtered.

With losing trades, I cut and run to prevent further losses. Hoping will get you nowhere. When you are wrong, you are wrong.

This is part of the mind-set you must have when trading. It’s good to be greedy when you are taking profits while you have them…it’s not, when greed is what keeps you from doing so.

So what can you do to overcome these emotions?


Create Discipline with a Trading Plan


Top traders have a mindset that no matter what, they will follow the plan… lock in gains, cut losses, enter on point etc… No matter what.

And they do not argue with the plan.

Every trade matters, there isn’t one that’s less important than another. When you create rules that work…you cannot question them.

Successful traders stick to their strategy…they don’t trade on a whim… they trade their edge.

This all has to do with having a plan for every trade.

When will you get in? Why? What’s your thesis for the trade? Where will you take your loss? Your Profit?

You should have a detailed plan that will keep you from making decisions on the fly.


Quiet the Negative Thoughts


The best traders are aware of the negative thoughts but don’t get derailed by them… they are able to detach from the negative, and replace them with positive thoughts.

If you have a negative thought come up…acknowledge it and then reverse it.

Let’s say you start to think: “I am never going to make it as a trader” … acknowledge it, and flip it.

Now repeat to yourself – “I will become a successful trader” – over and over… do it until that’s what you believe and feel inside.

Make this a practice and you will crush any power the negative thoughts may have had over you.


Practice Meditation


Meditation is a common theme among top performers in all walks of life.

It helps you become more awake and more purposeful about your actions. As well as, become more aware of your thoughts and emotions so you can respond, rather than react, to situations in your trading.

Practicing meditation will help you get to know yourself on a deeper level while also lowering your baseline of stress and anxiety.

It can and will help you build a powerful mental state that will take your trading to another level… as well as benefit you in all areas of your life.


The Mind-Body Connection


We all know that exercise is good for us, yet how many of you actually do it regularly?

If you don’t, you are missing out on the huge benefit from the connection between a healthy mind and body.

As you know trading can load you with stress and when your mind and body are strong and healthy, it becomes much more manageable.

Find time to disconnect from trading-related stress that can make it difficult to adopt a success-oriented mindset. Get outside, stimulate your body and mind through exercise, fresh air, sunshine, etc.


Grow from Mentorship and your Environment


Mentorship is often discussed with regard to self-improvement and trading success…

The most successful traders have mentors or hire coaches to help them stay focused, remain accountable, and hone their craft. They know this is a key ingredient to push their trading to the next level.

And along the same lines, your environment also plays a significant role in creating a healthy mindset. After all, we’re social creatures and are influenced by those around us.

If you are what you eat…that goes double for, you are who you associate with.

Surround yourself with profitable hard working traders who can teach you new things and encourage you, and you will thrive.


Final Thoughts


The psychological aspect of trading carries a lot of weight.

It’s not something you want to neglect.

It’s really a never ending battle.

But to get started…have a strategy that you are comfortable with, use proper risk management, and simply make sure you have a detailed trading plan for every trade.

Journal and review your trades to learn where emotions creep in and where you make mistakes…fix them.

Keep learning and adjusting along the way. Forever…trust me, the struggle never ends.

And if you aren’t a profitable trader yet…Paper Trade First.

Get consistent with fake money before you go live.

If you can’t follow your plan with fake money, I can assure you it can be extremely difficult if you do decide to use real money

Be smart and logical…keep your emotions at bay.

And I’ll leave you with this…

Profitable traders know what their edge is, and they exploit it repeatedly.

You won’t make a living taking random trades and changing your plans mid-trade while your emotions are running high.

When in doubt…get out…and reassess while you aren’t emotional.

Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

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