Developing a Confident Trading Mindset

Traders need confidence to succeed. Clearly, anyone needs confidence if they want to excel at something like trading or sports, where you are competing against an opponent(s), and don’t kid yourself, the market and all other traders are your opponent.

You are even your own opponent in trading, so basically, everyone is your opponent in the market, and it literally is ‘you against the world’. In fact, you probably have even gotten condescending comments from your closest friends and family (who probably know nothing about trading) about ‘trading being a waste of time’, etc.

The only way you will battle through all this adversity and defeat all the opponents inherent to trading, is by having unwavering confidence in yourself and your trading abilities.

You NEED the right type of confidence

The market is a minefield, and a lack of confidence can put a serious dent in your trading performance. Having low confidence often causes traders to develop problems pulling the trigger, anxiety, stress and serious mental pressure when faced with entering, managing and exiting trades. You will never make money as a trader if you’re trying to trade from an unconfident mindset that causes constant problems like these, so if you know you have any of the symptoms just mentioned, it’s time to take a step back and get your act together, or stop playing the game all together.

It’s important to note the HUGE difference between false-confidence and real confidence in trading. False-confidence is easy to obtain; you hit a few lucky winners and you feel like you’re a market wizard.  But beware, this confidence is fleeting and will definitely do you more harm than good because it was derived from luck, instead of skill and proper trading habits.

Real confidence comes from proper trading habits. The longer you trade properly, with discipline and patience, the more these things will benefit and payoff for you, and you will begin to see their power. Over time, consistently trading with discipline and patience (following your trading plan, not over-trading or risking more than you know you should) will get reinforced in your mind and will become positive trading habits. Arming yourself with the power of positive trading habits and knowing that you are not just relying on luck, are insanely powerful trading ‘weapons’ that will build real, indestructible trading confidence within you.

Here are some tips to help you increase your trading confidence…

Tip #1: Use winners to build confidence, but don’t get over-confident

What better way to build your confidence than a winning trade, or better yet, a string of winning trades? Be cautious though, winning trades can and will go to your head if you let them, causing over-confidence which can quickly lead to over-trading.

However, it is important to reflect on your winning trades after they are finished. You can make some quick and simple notes in your trading journal to record the various attributes of the setup you traded and why you believe it was a good one. However, keep in mind that even a good setup that meets your trading plan criteria can fail, so don’t get into the dangerous of habit of thinking that every trade that meets your plan’s criteria will work. That said, it IS important to understand what a winning trade setup looks like and to use it to remind yourself that you CAN find and execute winning trades, doing this will help you build confidence in your trading ability and skill.

It doesn’t matter if you’re trading a small or big account, trading a live account and having winners will build your confidence. Aim to get good trading on a small account first, even if you have a lot of money to trade live with. You don’t want to just dive into the market with a 50k or 100k account if you are new or have no live account trading experience under your belt. You should aim to start with small amounts and focus on learning to trade properly first. Then, as you develop solid trading skills, habits and eventually real confidence, you may feel comfortable putting more money into your trading account down the road.

Tip #2: Use losers to learn a lesson and strengthen your trade execution

Losing trades can be the best ‘teacher’ you’ll ever have. However, just as with winning trades, it’s important to note that there will be a normal statistical variance of losing trades within any trading edge. So, you should not fall into the mental trap of thinking that EVERY losing trade you have was a major failure or that it means something is ‘wrong’ with your trading method or trading ability. Sometimes, perfectly good trade setups will fail, as that is just part of the game we call trading, so you just have to accept these trades and move on…assuming that you stuck to your trading strategy and the trade wasn’t taken out of greed, revenge or fear (over-trading).

The losing trades that you NEED to learn from and that you can learn a lot from, are those ‘stupid’ losing trades that you unfortunately did take out of greed, revenge or fear…and I know you know what I’m talking about here. After the trade is finished, you can record in your trading journal what you did wrong and why the trade was a failure; use these types of losing trades as a lesson and dissect what went wrong, you can then use this information to strengthen commitment to sticking to your trading strategy and plan.

The aim here, is to hopefully not make the same ‘stupid’ trading mistake twice, after all, your hard-earned money IS on the line every time you enter a trade. As you learn from ‘stupid trades’ it should help build your confidence because you will begin to see the power of remaining disciplined and consistent in trading, and you will start to see that you CAN trade successfully if you just stop making stupid trades.

Tip #3: Act ‘as if’, even in the face of losing trades

Confidence, sometimes has to be an act, “fake it ‘till you make it” as they say. Especially in trading, you have to be able to “fake it till you make it”, because in the beginning you’re going to be fighting some VERY strong emotional impulses and demons that can and will cause you to blow out your trading account if you let them.

You have to be able to just walk away from your computer after a trade, win, lose or draw. A professional trader does not sit there and give back all the profits they just made on a winner, and they don’t sit there and try to take ‘revenge’ on the market and ‘make back’ the money they just lost on a loser. Instead, they accept the outcome of the trade and then they go about their life. They only trade IF there is a reason that meets their predefined trade criteria. So, if YOU cannot do this on a small account, you won’t be able to do it on a big one either. You need to be confident and act like you’re a ‘super trader’; believe in your trading skill and trading edge, you really do need to trade as if you’re a ‘baller’ / hedge fund manager, if you ever want to make a living as a trader someday.

Conclusion

In my courses, I aim to help my students develop confidence and belief in the price action strategies they are being taught, after all, there’s no point trading a strategy unless you believe in it 100% and are prepared to back it. Instead of constantly asking yourself “is this going to work, should I take this trade or should I hold off?”…you need to just follow your trading plan and stick to your strategy. As a result, you instantly remove those questions and revert to the trading plan, and then the question of whether or not what you’re looking at is indeed a logical trade setup worth taking, will easily be answered by determining if the setup meets the simple criteria outlined in your trading plan.

The next time you go to place a trade, I want you to hear my voice in your head asking you “Does the trade make sense and fit the plan? If it does, then back yourself, believe in your edge. If it doesn’t fit the plan, then go to the gym, play a round of golf, take the family out, but don’t enter a trade if there’s no reason to!” There’s no better way to develop your trading confidence than proving to yourself that you can stick to a trading strategy and trading plan consistently, and then see the benefits of your consistency begin to pay off.