Stock Trading and Mental Toughness

Author: Linda Raschke (MarketClub Trading Service)

Trading is a performance-oriented discipline. The psychological aspects to trading can be 90% of the game. You must always believe that there is a way to make your monetary goals - even if it takes an eternity to do it.  You must believe it is possible.  You must believe that there is a strategy you can use and fall back on.  You must have a game plan for every day. Focus on the numbers, patterns, and tendencies to get an edge.  Knowledge will give you an edge.  So will understanding your own game.  Preparation will give you your final edge. The following comments were inspired from Brad Gilbert's book, "Winning Ugly," which was written about tennis.  There are many parallels between tennis and trading, both being individual performance disciplines.

* The most successful players are the ones who have a burning desire to win.

* Don't check out of the game.  Never give up. DEFY FAILURE!

* Improve your consistency.  Stay active, stay involved, and keep your feet moving.

* Be patient.  Do not force a trade that isn't there.  Wait for the play to set up.

* When you get a good trade, go for it.  Manage it.  Trail a stop.  Don't be too eager to get out.

* Be flexible if what you're doing isn't working, change.

* When down, get a little rhythm and confidence going.  Don't worry about being too ambitious.

* Stay with your game.  Don't let outside distractions bother you.  They take energy and break your concentration.

* Match your particular strengths to the type of market conditions.

* Hate making stupid mistakes and unforced errors. This includes not getting out of a bad trade when you know you are wrong.

* Many players will play their best game when they are coming from behind.

Mental Toughness

Monitor your very first trade or instincts to see if you are reactive or not.  If you are emotional, why? No game plan? Not prepared? Too many positions? Have you just had a big winner or big loser? Once again, know yourself and your style.  do you fight back when you have losers, or do you hold back on pulling the trigger?  Jesse Livermore knew the markets and how to read the tape as well as anyone in his time.  He made many great trades and knew exactly how to trade to make money. He had a well-defined methodology that had proven itself many times over. But, he blew out many times and ultimately wiped out in total in the cotton market. He died penniless. Why? He was a compulsive gambler.  Even though he knew exactly how he should be trading, he could not act in accordance with this.  His greatest enemy was not lack of knowledge or preparedness.  It was truly himself. Every great trader will have periods where they are not in the right space to trade.  Evaluate yourself after a losing spell and see if you can identify if there were external factors that got in the way.  Learn to re-center and regroup. where do you get yourself into predicaments? Avoid situations that get you into trouble.  Which is worse - seeing the trade but not acting on it, or over-trading and not distinguishing between the high versus the low probability trades? You can't look back at the trade you have just blown.  You can only look forward.  You must stay in the here and the now.  Only look forward and do whatever it takes you to keep going. stay in the present, the here and now.  Do not look on a horizon too far.  What do you see now? Stay in the market down to the minute.  What is the market doing right now? Discard losing trades.  Learn to take the loss the best way you can do it.  If you perceive that the loss is going to get worse, get rid of it right away.  Put on the biggest positions when you are at the sharpest point in the game.  Is that the first part of the month when you are fresh or the last part when you already have profits to play with?  What is the personality of the market for the day? Some traders use a model of a market manipulator, a composite operator, or a a pool operator.  Are the big players present on the day? It is like assessing the weather conditions for the day.  Is it the type of day that you can make hay on? The first trade is often a test trade not only to judge your emotional state but also to test the liquidity. You must not allow any outside influence into your trading space.  Your belief in your indicators must supersede everything.  Battle to see the price objectively as opposed to what you feel or believe it is.  Have an initial plan.  Adjust the plan after the opening.  Even if you are just a scalper, you need a daily road map.  every trade should be made for a reason. It is easier to have studied the chart patterns the night before and then just focus on a few key pivot points.  Always be on guard against getting causal.  If you let a loss go too far, you are still going to have to get out eventually. Hardships, setback and deprivation make a person tougher.  People who have experienced adversity before do well because they know that failures and setbacks are part of the process.

When Things Go Bad

Talk about your fears or problems.  acknowledge them. this is the first step in learning how to deal with it. Make sure you do not sink into an investment mentality. The market has a different personality every day and can be traded in both directions.  Go back to basics.  Do some research. Study the simple trading patterns.  Manage your lifestyle. Keep a balance and perspective and guard against burnout.  Do your homework.  Ask yourself, are you a trader today? then follow your plan.  Jumpstart some other part of your life such as an exercise program or  hobby.  Keep your mind occupied.  Do not dwell on damage done that can't be undone.  Learn how to channel your stress. A physical outlet is an excellent way.  Build a support network.  Have a friend or family member you can confide in.  Develop other trader friendships.  don't forget to remind yourself about the things that you have done right in the past.  Make sure to note the patterns within yourself so the negative ones do not repeat themselves.

Psychology of Winning

Your mind is the most powerful tool you have.  Be loyal to yourself.  Never be down on yourself for making a bad decision.  Keep a positive attitude, especially when you are losing.  Believe you can accomplish your goals eventually, no matter how long it takes.  Don't worry about perfection.  Don't be afraid to make mistakes.  Do what the correct action calls for. Believe you can win the game before you sit down to play.  Don't second-guess yourself.  Trading is not an intellectual exercise.  If you are very smart and disciplined, it might work against you.  Give me someone with street smarts any day.  read your goals everyday!  Fight against yourself and you will beat everybody.  Fight against everyone else and you'll always play catch-up.  Learn to use anger and make it work for your.  You can channel it into a positive thing or you can self-destruct by it. Steady as she goes... That's where all the money's going.  There's a different dance to dance everyday.  if you find an indicator that works, beat it to death. Everyday - appreciate the successes you've had.  If there is a will, there is a way!

The Winning Formula

People who are master or winners in their chosen field share common traits:

1. Passion - You must have a driving force that motivates you to succeed.

2. Belief - You must believer that you can achieve your goal. You must believe that you have the ability to overcome any obstacle.

3. game Plan - Have a strategy or business plan by which to attack your goal. lack of organization and preparation are the main reasons people fail.

4. Integrity - Have a personal value system.  Your personal code of ethics is the strongest statement you can make about who you are.

5. Commitment - Commitment taps the unlimited source of energy reserve inside you.  It provides the strength to keep moving forward each day, even when there is no visible progress. It allows on to focus on the small task at hand while keeping the end goal insight.  Commitment doesn't end once the initial goal is reached. It is a process of striving for constant improvement.

Determination and Attitude = Success

A race is never won unless you finish it . It is never started unless you believe you can do it. To begin and end any endeavor, you must have the attitude that you can do it and be determined to finish what you start. The field of trading is no different. finish what you start! but to do so, you must have the attitude that is is possible to win. You must be determined to prove yourself right. The facts are: if you believe you can do it, you can do it! I once heard words from a man who was paralyzed from the chest down and told he would not be able to get around on his won, but now moves freely in his wheelchair, as well as drives.  "If it is difficult, you can overcome it .. If it is impossible, it just means it will take a little more time."

How true those words are!  do you allow others to tell you that you cannot succeed?  Do you tell yourself that you are not good Begin: AD --> enough?  Do you put off taking action although you know you really should? Do you find yourself giving up before completing what you started?  If so, you need to readjust your attitude and become determined to finish what you start.  All people are unique with different gifts.  Yet, with a positive mental attitude, a belief that you are just as capable as anyone else to succeed, you will have the foundation to build upon.  Let me tell you a story I found interesting:

There were these two eggs that were soon to come alive.  They were discussing what they wanted to be in life.  The one egg says to the other, "I would like to like an oyster. An oyster only has to lie at the bottom of the ocean and just lets the water move him about.  I will eat the food that comes between my shells as the water moves past me. I will eat only what the water passes by me, no more and no less.  I will go where the water moves me.  As an oyster, I won't have to do anything at all."  The other egg said, "That's not the life for me.  I want to be an eagle.  Sure, I will have to hunt for my food.  but I will be able to go where I want to go. Sure, life as an eagle will be harder, but I will be able to sour above the mountains or into the valleys below.  I will control where I will go, not be controlled. Yes, it will be harder to be an eagle, yet I will be free to choose where i will go."

This is exactly what life is all about, and also trading... whether trading stocks, bonds, commodities, futures or options.  The water is liked to the masses of traders who inevitably lose.  The reasons why usually start with attitude and determination.  Instead of choosing for themselves in the direction in which to travel, they let the masses do the choosing for them.  The results are disastrous and they soon drop out of the race.  I suggest an affirmation, which has shown great results with many people employing them. Each day, on a clean sheet of paper, write the following line 20 times. Do this each morning for 21 days straight.  By doing this, you will reinforce in your mind that you will succeed, and your determination to do so will improve daily.  It is up to you to stick to the for 21 days to be effective. This is the affirmation:

"All my thoughts and actions draw success towards me more and more each day."

In almost any endeavor worth the effort, it takes climbing some major obstacles to get over the hump.  Too many people actually quit right when they are on the 1-yard line.  don't let this be you. Believe in yourself, as you are just as capable as anyone else who has succeeded before you.  What made them successful was always believing they would be without question.  If you hear yourself saying to yourself, "I can't do this", it will take 3 affirmations on a positive basis or more to correct.  Keep thinking positive thoughts and believe them.  It has allowed many to rise from the ashes of mediocrity to the height of greatness.  step out of your bubble and do something you might have been afraid to do before, no matter how small.  Small steps will eventually get you to the finish line.  Time is not relevant if you start now. You will finish.  Be determined to do so regardless.  Avoid those who talk the negative talk, as they have given up and do not wish for anyone around them to successful, thus leave them alone.  Surround yourself with positive people, people motivated to improve, always encouraging you to continue your dream, your goals. What you feed your mind is what will motor your mind and actions.  make sure you feed it the food of positive thinking.  Be determined to succeed in your dreams to be a successful trader, no matter how long it may take.  Because if you ever give up, this will most definitely carry over into other aspects of your life. Don't let it!  Be like the eagle. You are in control.  Fly the heights in whichever direction you choose.  It doesn't matter, as long as you are the one making the choices, and not other for you, like that of the oyster in the ocean.  Be determined to succeed. Have the positive attitude that you will succeed.

About the author:

Linda Bradford Raschke began her trading career in 1981 as floor trader making markets in equity options on the floor of the Pacific Coast Stock Exchange.  In 1984 she became a member of the Philadelphia Exchange, where she expanded into trading futures.  In 1987 Linda left the trading floor to concentrate on trading futures only.  However, she continued her 16-year study of technical analysis and price behavior, developing proprietary trading tools, methodologies, and systems based on her floor-trading experience.  Linda continues to teach traders how to trade and is actively involved in presenting trading workshops and online seminar for companies such as the MarketClub Trading Service. To find out more about MarketClub, see what others are saying about this tool: MarketClub Trading Service.