Mental Trading

I feel when I first began trading there was very little information on the mental aspect of it. Sitting in front of a screen day trading futures as you go through a whirlwind of emotions. The emotions were not something I was used to, sweating out every tick.

I cannot stress enough the importance in trusting your strategy. Whatever it may look like. If you for instance you tell yourself that after losing 2% for the day you are done, stick by it. If you have a target goal for x amount of dollars a day, and once you hit this you’re done, stand by it. Where traders lose out is in the mental game.

This simple aspect could make a phenomenal trader a very poor one. “Chasing” as I like to call it is by far one of the most foolish things one can do. This applies to multiple things.

  1. Chasing price after a losing trade, attempting to get “revenge” and negate the prior loss, even though the setup it poor.
  2. Chasing gains on a good day, to the point where your highly positive P/L for the day, then becomes mediocre or even negative.
  3. Chasing a setup after the move has already happened. If the ES jumps 15 handles and you aren’t in it, sit on the sideline and wait for the next move. It is far better to regret a move you are not in, than to regret one you are in. The beauty of a nonlinear market is that there will be another move, TRUST ME!

Just keeping these three points in my mind helps me check my ego daily, and has saved me a ton of money. This combined with having a short memory are probably some of the most important things to have while trading. Don’t get too caught up in how a prior trade went. Leave it in the rear view and move on.

I think one of the most important things is to be flexible in this market. You are never going to be more intelligent than it. I at times watch my algo take trades I personally wouldn’t have taken based on my biased view of direction at that moment.

We as traders can learn from this. The software does not have a preference on a direction. It simply makes the trades based on the code that was written for it. We need to learn to not be so hell bent on trading one direction. Go long when the opportunity presents itself, and go short when the opportunity presents itself.

Above all check your ego. You’re not that great, hell every trader hits slumps. The thing that separates the amazing from the good, is the willingness to say, “I guess I was wrong.”

I hope this helps some of you out there. Just a quick write. Any questions or comments, feel free to speak your mind, in the comments section. Cheers.

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