Do you want to be a successful trader? Then you need to master the trading mindset.
Having a profitable trading strategy matters only 10% of your trading success. The 90% matter flawless execution. And flawless execution comes from a right trading mindset.
If you read stories about entrepreneurship, you have all seen the secret of all rich people is their mindset.
As a trader, what do you think is more important, a trading mindset or a trading setup?
What is a trading mindset?
A trading mindset refers to the mental attitude and approach that an individual takes when engaging in real time trading. This includes the way they think about risk, their ability to make decisions under pressure, and their overall mindset towards the markets.
A trading mindset tells you how you respond to profits and losses during market hours. A trader’s mindset should be similar to the mindset of a casino dealer. The casino dealer never shows any expressions and keeps their temperament cool & calm.
Why does a trader’s mindset play a crucial role in trading?
You may have heard the rule of “90-90-90,” which says that 90% of traders lose 90% of their funds in the first 90 days of their trading career. Hence, these 90% of funds go into the pockets of 10% of successful traders because of their winning mindset.
As I mentioned above, most traders are excited about profits and panic about losses. That’s why only 10% of traders are successful.
Why only 10% of traders are successful?
The answer is they have a holy grail system. And the name of that system is “Winning Trading Mindset”.
In the next section, we’ll discuss the habits of a successful trader.
Habits of a successful trader:
Successful trading requires a combination of skills, including market analysis, risk management, and the ability to make quick, informed decisions. It also often requires a strong understanding of finance, and the specific market or asset being traded.
In the above section, we found that trading success comes from a winning mindset. Now the question arises of how successful trader achieve a winning trading mindset.
It comes through powerful habits.
Habit-1. Consistent works on mindset:
Habit-2. They rely on Backtesting of a setup”
Habit-3. Accepting small losses in the stock market
Habit-4. Focus on the setup, not on the P&L
Habit-5. Maintain trading journal
Habit-6. Super Trader lives a balanced life.
To know more in detail, read this article:
In the next section of this article, we’ll discuss how to master a winning mindset over markets.
How to master a trading mindset
As I mentioned the habits of super traders, so now you have the pattern of successful traders that how they achieved their winning mindset. You identified the pattern and now you’ve to follow this pattern until you achieve a rich perspective. Before that, you should find your pattern.
It is very important because when you go through this process you’ll identify who you are. Every trader has their own unique approach to analyzing and making decisions about their trades.
Evaluate your strengths and weaknesses: What are you good at, and what do you struggle with? Knowing your strengths and weaknesses will help you focus on the areas where you are most likely to succeed, and work on improving your weaknesses.
This self-awareness tells you where you are.
Task: Now you have a pattern of your own and the pattern of a successful trader, so it’s time to break your older pattern, make a new pattern, and follow the pattern.
Tips to master your trading mindset:
Active Income Source:
It could be your job or other sources of fixed income that come into your pocket every month. An active income source is any type of income that requires ongoing effort or work in order to be earned.
You are wondering!
How does it improve trading mindset and results?
There are two reasons for having an active income. Firstly, when you trade you’ll think about making better trades rather than think about money in every trade. And the second reason is, it helps you to grow your trading account quicker because you’ll add regular funds.
Let’s say your trading capital is Rs 1,00,000.
And you make 10% in one swing trade which is Rs 10,000.
If you have a trading capital of Rs 10,00,000 and you make 10% in a swing trade that is around Rs 1,00,000.
Positive environment for trading:
You are the average of the five people you spend the most time with.-Jim Rohn
What does it mean?
Most of you heard from your parents and friends that trading is gambling and it’s only for big players. And it creates a block or a limiting belief in your mind that prevents you to get success in trading.
Hence, a positive community plays a crucial role in your trading success.
Warren Buffett reads 500 pages every day, and he is one of the most successful investors in history that’s why constant learning matters.
Constant learning is the act of continually seeking out new knowledge and skills in order to improve and grow. As Android and IOS have upgraded versions, similarly, learning provides an upgraded version.
Task: Try to spend at least one hour reading books and taking courses.
Motivation factor for trading mindset:
It refers to your trading “why” statement. Simply put, before you begin your trading career, consider WHY you want to be a trader.
And try to make your “why” statement bigger than money.
This motivation factor will keep you going when the going gets tough.
The loop of Competence and Confidence:
Competence refers to the ability to perform a task or activity effectively and efficiently, while confidence refers to a belief in one’s own abilities. In trading, competence is your ability to follow any system. And confidence is something that you follow any trading setup without hesitation.
How do you get more competent in trading?
The answer is through “Backtesting”.
What is Backtesting:
In technical analysis, backtesting is a tool to use to test any system on historical data. Backtesting a system provides you with more competence and confidence in the system.
The best way to backtest any system is manually one by one chart, which covers all cycles of the market.
Task: Practice any trading system on 40 charts.
Backtesting the system will help you become more competent in it, and forward testing will help you gain confidence in it. You can’t imagine that you’ll be in the loop of competence and confidence.
“Discipline is the bridge between goals and accomplishment.”– Jim Rohn.
Trading discipline is a crucial element of successful trading, as it helps traders make consistent, rational decisions based on a pre-defined set of rules, rather than being swayed by emotions or external influences. It involves developing a clear trading plan, setting and sticking to risk management guidelines, and maintaining a long-term perspective. It is a simply an ability to stick with your trading plan.
Let’s understand with an example:
Your trading style is a swing and positional based on the “CUP PATTERN” setup.
As you all know every setup has a drawdown period. And you faced a series of losses.
So, now you have two choices, either quit this setup like most traders do or stick with it like a disciplined trader.
Task: If you want to be a more disciplined trader, then you should maintain consistently your morning routine like a successful trader.
The morning routine of a successful trader:
I’ve recognized the pattern of a successful trader and found one common thing is their super powerful morning routine.
Some actions you can do in the early morning:
And last but not least be consistent with this morning routine.
Get your free template of “Positive Affirmations”.
Patience is the key that distinguishes successful traders from amateur ones. It is the ability to wait for the right opportunities. Patience can help traders avoid making rash decisions and sticking to their trading plan, even in the face of market volatility or setbacks. Therefore, patience plays an important role in a trading mindset.
Assume you’re a swing trader and you are waiting to enter a profitable trade. But there is no sign of quality trade. And you’re chasing the market by entering forcefully, this is the sign of an impatient trader.
On the other hand, professional traders trade to make better trades. Whether it comes in a day, week, or month, they have that much patience to hold their nerve.
Key Takeaway: Now you may get why successful traders have success because of their trading mindset. If you achieve a winning trading mindset, then you’ll make money with any trading system.
If you’re a swing and positional trader you can take the help of this eBook.
Trading is simple, but not easy. Yes, it’s true. The tough part of trading is to master a correct trading mindset. When you have done it, trading is simple for you. If you want to be a successful trader then try to make as much as possible trading simple. Don’t make it complicated.
Trading is not a rich-get-quick scheme, so treat it as a business. And in business some days you lose battles but you need to think about long-term war.
If you have some doubts or queries, ask in the comment section.
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FAQ about Trading mindset
How to improve your trading mindset faster?
Firstly, improving a trader’s mindset is a long-term process, so don’t be in a hurry. It can’t be done overnight.
If you follow the techniques outlined above in your trading journey, you will undoubtedly develop a winning trading mindset. By following these techniques and being persistent and consistent in your efforts, you can improve your trading mindset and increase your chances of success in the financial markets.
Which books can help me to achieve a trading winning mindset?
You can get knowledge from books, videos, and articles like this but without implementation, you’ll never achieve any results.
The books that help me to maintain my trading mindset:
- Trading In the Zone by Mark Douglas
- Super Trader by Van K. Tharp
- Think And Grow Rich by Napoleon Hill
- The 7 Habits of Highly Effective People by Stephen R. Covey
- And much more.
Which plays important role in trading, Mindset, or Skillset?
Of course, both are important. A trader’s mindset refers to their overall approach to the markets and their attitude towards risk, while their skillset refers to the specific knowledge and techniques they use to analyze and make trades.
But if you ask to pick one then mindset plays a crucial role in trading. Because if you have the right skill to trade but a winning mindset helps you to hold on to winning trade and exits you with a small loss from losing trade.
How do you continually improve your trading mindset?
Improving trading mindset is an ongoing process that requires dedication and effort. Here are a few tricks which I use so, you can copy this to continually improve your trading mindset:
- Regularly review on trading journal:
- Reading Books:
- Stay focused and maintain discipline:
- Super powerful morning routine: