It may seem a contradiction to say that you don’t want to pay attention
to the profit of a trade. In fact, many
of you might be saying that this guy must be smoking rope to say that profit is
unimportant. Well, to clarify, that is
not what is being said. Of course,
profit is one of the main reasons why you are involved in trading in the
financial markets.
However, when we discuss how you will garner your mental and emotional
resources in order to become consistently successful, profit (in any one trade)
is not where you want your focus to be. Profits come as a result of
“probabilities” over a series of trades. In fact, profit can be a major
distraction and the cause of erratic behaviors that beget unwanted
results. Let’s face it, results,
consistent positive results, are what you want.Tweet: Let’s face it, results,
consistent positive results, are what you want. Anything else is
unacceptable. So, your main trading
trajectory must encompass this reality.
Consistently successful trading requires a laser focus on what-matters-most;
alignment of body, mind and emotions; and an ability to be truly disciplined,
for starters.
Honing your trading process and the focus of your trades.
The Distraction of
Trading Profits
Let’s look at how focusing on profit can position you to attract the very
undesirable results that you want to avoid.
Profit is transient which means that it is not only variable but it is
random to the point of being capricious.
No matter how good your methodology, you cannot predict what price
action will do. The only thing that is
certain about the markets is that they are unpredictable. Due to this level of randomness, profit is
an extremely inefficient data point to measure against results.
In fact, one of the worst things that can happen to you as a trader is to
be profitable early in the game before you intimately know your strategy. This type of profit is almost invariably
luck. Luck is totally unsustainable; and
in your attempt to replicate these results you will reinforce bad rule
violating behavior that is very hard to halt, creating many more losses as you
attempt to extricate yourself from that abyss.
Furthermore, when you focus on profit alone, your attention is
fragmented and your mental state is susceptible to distorting data due to a
confirmation bias (the tendency to only perceive information that confirms your
limiting beliefs about the current market and consequently denying information
that is contrary but critically important).
Free Trading WorkshopActually, you want to approach the trading process
with your eyes wide open and embracing the fact that any trade can lose, and
some will. No matter how strong your
strategy, you must accept the randomness of the markets and therefore be very
serious about protecting your capital; in other words, using and relying on
your stops. In this way, you will begin
to manage your fear…a very important skill.
One of the facts about consistently successful traders is that many of
them have blown up accounts; and they came back. When this happened, they realized that the
world didn’t come to an end and developed a deeper appreciation for the
importance of their stops. They created
consistency in planning their trades, trading their plan, following all of
their rules, and thereby developed the capacity for emotional strength and
endurance in the trade.
Trading is a process oriented endeavor for those who are serious about
becoming and remaining a consistently successful trader. In any one trade, it is not about the
outcome. You must remain dispassionate
about that and reserve all of your focus to be honed on what you are doing and
how you are doing it. This is what we
teach in Mastering the Mental Game online and on-location courses. Ask your Online Trading Academy
representative for more information.
Also, get my book: From Pain to Profit: Secrets of the Peak Performance
Trader.
Joyous Trading
Author: Dr. Woody Johnson
Article reproduced with kind permission of the author.
The article is ended with more
helpful quotes:
“One of the biggest
mistakes that newbie traders make is to give up on a trading strategy after a
run of losing trades. The thinking behind doing this is understandable but very
wrong. The thought is “If a strategy is losing trades, why keep doing it?” The
point is that every trading strategy has losing trades!” – Jasper Lawler
“Always keep in mind
that trading is mainly a mind-game playing probabilities. Try to find a
strategy that you understand and that fits to your personality and
possibilities and then try to build the trade management together with the risk
management around it. This will lead to much better results then searching for
the best entry technique of all times.” – Andy Jordan
“Trading is not for
anyone who has an unquenchable thirst for certainty. Uncertainty in trading is
co-equal with insecurity.” – Joe Ross
“However, the truth is
probably like most things somewhere in the middle and eventually with a level
playing field (which there will probably never be) it comes down to the
individual. In part this is why I like trading, it is a reflection of who you
truly are, not what your circumstances have made. The market has no idea where
you are from, what your social status is, your colour, your religion or your
sex. It merely knows whether you have the attributes of a good trader or you
don’t.” – Chris Tate
www.tallinex.com wants you to make
money from the markets
Traders’ Mindset: Traders' Mindset
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