You Got This! How to Build Confidence Around Trading

Hi guys! Hope all is well with you. As many of you know, I was transitioning from relationship and marriage coaching into trading coaching for the past 3 years and since January 2023, I’m 100% focused on the coaching around finance. I believe that financially successful and self-confident people can be their best selves, and achieve more harmony in personal relationships as well. Aren’t most of the relationship fights because of money? (And yes, sex, but once you have money sorted out, sex comes easier, in my opinion). So here is your new favorite finance coach, Lia. I’m going to be writing a lot on investing and trading psychology, habits needed for success and wellness around this industry. I believe that one’s mental state is the most important part to master to become successful investor or trader. So here we go, my first article will be on trading confidence, because trading successfully requires a lot of confidence. To build confidence, you need to educate yourself, avoid bad trading habits, and use the best tools that suit your personality.

Let’s begin!

When you first start trading, one of two things can happen: either you win and you risk becoming overconfident, or you lose, and you risk becoming overly fearful.

In either case, you risk losing your confidence, and when that happens, you are much more prone to making bad decisions. That’s why it’s critical to build up a healthy level of confidence around your trading practices.

Here are several tips for how to build up your trading confidence so that you can make the best decisions for your portfolio.

Develop Positive Trading Habits

The constant changes in the market can absolutely drive you crazy, wondering what you should do. It can lead to a huge lack of confidence in the decisions you’ve made.

This can lead to bad habits like pulling the trigger too early to either enter or exit a trade. Even if you’re making money, it can result in the false confidence that makes you feel as though every decision you make will be a winner.

The idea of trading is to recognize what is pure luck and what is skill. You want to hone some fine-tuned trading skills that will ensure you’re making thoughtful decisions rather than reacting rashly to the market.

So exactly how do you do that? The key is in developing proper trading habits. You need to trade with a high degree of patience and discipline. You need to develop a trading plan, and then you need to stick to the plan.

If you do that, you’ll begin to see the patterns of what works and what doesn’t. That will give you a healthy dose of confidence coupled with wisdom.

Celebrate the Winners and Learn from the Losers

While everyone loves to celebrate a winner, you don’t want to let it go to your head. Moreover, sometimes, the losers can teach you more about what constitutes a good strategy than the winners can.

One key element of a winning strategy is starting with small amounts so that you can learn more about trading properly. When you do win, recognize the strategies that helped in that case while at the same time recognizing that not every strategy will work the same way.

When you lose, analyze what resulted in the loss. Sometimes, you made a mistake, but sometimes even the perfect trade fails. By looking a little deeper to understand the loss, you learn even more about what is a good strategy going forward.

Don’t take every loss as a personal, catastrophic failure; rather, take it as a learning experience so that you don’t make the same mistakes again. You’ll get better, build confidence, and start experiencing more wins.

One study from Stanford University found that trading significantly improves your financial confidence, particularly among women. So don’t give up just because you suffer a few setbacks.

Apply What You’re Good at to Trading

The most successful traders are those that are good at something. They are entrepreneurs and professionals who are good at what they do.

The idea is, then, to find what you’re good at and apply the same principles you used to succeed in that area to your trading habits. For example, if you’re a professional, then you must have had to overcome some obstacles to get to where you are today.

You overcame those and rose above, and that gave you confidence in that field. You didn’t have that confidence; you cultivated it. Use those experiences as a backdrop to building confidence in yourself with your trading.

Yes, there will be obstacles and setbacks, but if you apply yourself as you did to whatever it is that you’re good at, you’ll be successful at trading too!

Make Your Trading Consistent and Disciplined

You can’t always predict which way the market is going to move, but you can stay disciplined and consistent in your trading habits. You can implement a stop-loss strategy to minimize your losses and stick to your trading plan so you don’t make hasty decisions.

By trading regularly in a consistent, disciplined way, you can build your financial profile over time. That will help you to stick to your plan, so you don’t make rash investments. Many traders make the mistake of getting in or out too quickly.

That kind of strategy yields larger losses. Instead, stay disciplined by adhering to your stop-loss strategy and waiting to get in until you feel certain you’re betting on a winner.

Avoid Obsessing

It’s also helpful to try not to obsess over what the market is doing. Don’t spend all day sitting at your computer with bated breath. This will simply drive you crazy.

You have your plan, so give it time to work. Obsessing won’t get you anywhere, and it can cause you to increase your losses because you react in a hasty way rather than acting after thoughtful consideration of what’s the best move.

Obsession is never a helpful tool when you’re trading. It’s easy to do when you’re watching the market fluctuations in real-time. Instead, take a break and come back at a later time. You’ve set your stop-loss, so have confidence in those and go do something else for a while.

Choose the Weapons in Your Trading Arsenal

Every trader has their own tools that they prefer to use. Some traders rely on market indicators, while others use pure price action. Still, others use a combination of those two.

You can also choose what types of indicators and oscillators, such as Fibonacci, candlestick analysis, or support and resistance. Yet another choice you need to make is between lower timeframes and fast-moving charts.

Educate yourself about these tools, and then pick your time horizon. You can make trading decisions that are completely your own and that complement your personality.

Focus on What You Can Control

There are a number of things you can control when trading and many more you can’t. You can’t control price and trade outcomes, so stop worrying about those. Focus instead on what you can control, such as what to trade, when to trade, when to exit, and the level of risk you want to take.

You can also pick your tools and strategy. And, of course, you can also control your reactions and your skills and knowledge. Educate yourself so that you know more about what kind of trader you want to be.

Final Thoughts

There are many ways to lose confidence while trading, but by applying these techniques, you can build confidence in your skills. That will help you make the best decisions for your portfolio and minimize your losses. If you utilize these tips, you really do got this!

Good luck guys!

LIA