Trading Success Begins with Mindset
It doesn’t matter how much money you have, it doesn’t matter how good of a technical analyst you are, and it doesn’t matter how much you ‘think’ you know about trading, if you don’t have the right mindset, you will never make money in the market.
Your success or failure in the market depends on your mindset. Most traders know something about how important psychology is in trading, but they either file it away as something they’ll ‘work on later’, or they just ignore it altogether. Huge mistakes. HUGE.
If you’re trading with the wrong mindset, it doesn’t matter if you have fifty grand in risk capital to trade with and you’ve mastered your trading strategy, you’re still going to fail. No strategy and no amount of money will make you money if you don’t have your head right about trading.
Let’s discuss a few of the more important aspects of trader psychology that you need to understand if you want to achieve a trading mindset that will prime you for lasting success in the market…
Money and mindset
Whether you think it does or not, risking money in the market influences your mindset. The most important factor in achieving and maintaining the proper trading mindset, is carefully managing your risk on every trader you take.
Risking more than you are comfortable with, will ‘infect’ all other aspects of your trading and it will start you out with the wrong mindset as soon as the trade begins. That is to say, it will make you overly-emotional and attached to the trade.
In what might seem like a cruel twist, the more you ‘care’ about a trade, the less likely you are to manage it properly. What I mean by that, is that the more attached and emotional you are with a trade, the more likely you are to over-analyse, over-think and be over-involved with it. The primary way you get to the point of caring ‘too much’ about a trade, is by risking too much. There’s a direct correlation between how much money you risk on a trade and how emotional you become about it. And if you’ve read my article on the the Four Horsemen that are killing your trading, you already know that being overly emotional about your trading is how you lose money.
The key is to smart with small amounts when you first start trading live. You will need to ‘test the waters’ a bit to find your risk ‘sweet spot’, where you aren’t too emotional about your trades. Start with a very small amount of money, one that you wouldn’t think twice about losing. Once you hit a risk amount that causes you to become ‘glued’ to your charts and unable to sleep easily at night, you’ve gone too far and you now need to dial-back your risk to a smaller amount.
Obviously, the dollar amount you’re comfortable with risking will vary for everyone as everyone has different financial situations, trading skill, risk tolerance, etc. It will take a bit of trial and error to find your sweet spot, but it’s critical you do this and it’s critical you don’t exceed that dollar risk amount. Your entire trading mindset and how you perform in the market depends on it.
Expectations are key
Traders often come into the market with extremely unrealistic expectations about many things. They are unrealistic about how long it will take them to learn how to trade properly, how long it will take to be consistently successful, and how often they will have winning trades. When you begin something with a boatload of unrealistic expectations, you’re simply setting yourself up for emotional pain, to say the least.
To help you keep your expectations in-line with the reality of the market, start by reading my recent article on the key to lasting trading success. In that article, I talk about the random distribution of winners and losers for any given trading strategy or edge. Most traders make the mistake of ‘expecting’ every trade to win, while forgetting that their trading strategy might have an overall win rate of 60% (or less even). This means they will lose 40% of their trades, but the key is that you do not know WHICH trades you’ll lose and which you’ll win.
Given this random distribution of winners and losers, it’s no wonder so many traders lose their discipline and patience and start over-trading and losing money. It takes an iron-clad mindset to remember that any one trade doesn’t mean that much, but that you have to stay the course and stay true to your trading strategy over a large enough series of trades to see your edge play out.
You must relinquish all emotional attachment to trades. Along with controlling your risk as we discussed previously, you can do this by controlling your expectations about trading and your trades.
Simple is better
Human beings have a tendency to complicate things that should be simple, making things more difficult than they really need to be. This is especially true in trading. When you have a complicated and messy trading strategy, it’s going to be the first thing that influences your trading mindset in a negative way. It’s critical that you remain calm and clear-headed when trading, and in order to do so, you need a simple trading strategy, like price action.
The actual act of analysing the market and identifying key chart support and resisance levels, trends, price action setups, etc. is not the most difficult part of trading. The most difficult part is risk management, profit taking and trade management; and all of these things are going to be made exponentially more difficult if you are in the wrong frame of mind due to trading a messy and overly-complicated trading method.
So, starting with the foundation of a simple yet highly effective trading strategy, is step number one to achieving and maintaining the proper trading mindset. You can learn such a trading strategy by taking my price action trading course. After that, maintaining the proper trading mindset lies in money management (controlling risk mainly, as discussed above) and managing expectations, as we discussed above. If you can implement these three things with discipline and consistency; simple trading strategy (price action analysis), money management and realistic trading expectations, you will be well on your way to developing the proper trading mindset and as a result, consistent trading success.
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Good trading, Nial Fuller
45 Comments Leave a Comment
The most difficult part is risk management, profit taking and trade management; and all of these things are going to be made exponentially more difficult if you are in the wrong frame of mind due to trading a messy and overly-complicated trading method.
Amazing article. Thanks for sharing this amazing and helpful article with us. I hope you keep your good work and publish it.
Thanks for your suggestions it’s a very interesting article and will be helpful for both beginner and intermediate Forex trader. It’s very informative. Thanks again for sharing.
Very good post, Nial. Keeping it simple in trading is the best way. Using a simple trading strategy and staying clear while trading is the way to trade. You need the right mindset to manage the risks involved. A wrong mindset can do more harm than good.
Simple but holding very important information. Mindset is everything.
Thank you Nial
Thanks for a simple yet detailed and straight to the point insights. More success, and may you continue to share your blessing through idea sharing. ????
Hi, I am Alpesh.
Firstly I congratulate you on your success. Your article will be quite helpful for the beginners in the trading market. Good job. Keep it up!
It’s a big contract to build a mindset we will stick to no matter what ! …
But still, you got to do what you got to do ! …
Thank you Nial for your reminder ! …
nice article to kick start the new year
I wanted to know English and chat with you …. You are summarizing the concept very clearly .. You are giving the key to success for a treder .. There is no need for anything else … A wonderful summary in one word …. I congratulate you
The key word is Risk Management. Everyone need control you account.
Hope it work out for me .thanks
Thanks for your insights.
Thank you for the great mind wake-up. Our main enemy is our own-self, very hard to against it, greedy is the next one.
Nial, you’re the best.
Nice one, thank’s sir.
Very rich content, and i have truly absorbed all of it. Thank you.
you killed it nial, I like your lesson today 101% times. thanks man.
Thanks for the article. For me the biggest problem is patience,waiting for the right signal so that I enter the trade. I am training myself to have a mindset to always wait for the right signal.
Thanks for your advise…….
Hi Nial,these most difficult parts are so vital to every trader. If they are strictly adhered to,one would not only stay long in d market, but also confidently earning and b professionally minded.
– to not dig in lower TF’s: day trading, for most of us, is a true killer
– to not over complicate things => KISS!
– to stay true to your “strategy”
– to manage proper risk
These are all essential components I have learned from Nial three years ago. This man introduced PA to me in a clear and simple manner. Greatly appreciated!
And last but not least:
Thanks Nial,very useful information for beginners.
Simplicity is the best. Thanks Nial
thanks Nial. truly, mindset is the key.
This is the Holy Grail. It is the most important factor in trading success.
I think you have said it all, loud and clear especially to us beginners.
Personally, I believe the hardest part of trading is waiting for a position to play out and reach its conclusion – whether that be a win or a loss. But I guess you “pays yer money and takes yer choice,” as they say. You have to let the market do the rest, for the most part, don’t you? Thanks as always, Nial.
thanks a lot sir
Thanks Nial for necessary article
You’ve nailed it exactly
Very wise information this soo useful for beginners.
I like your view to trading keeping it simple at all times, the Best all ways make it look easy, but that is only because they have put in years of hard work. Huge Thanks for these great articles.
Thanks Nail, it’s a great article and I am learning on it. Simple is better
Market anatomy and physiology properly dissected as always, thanks mentor.
Thanks Nial – I personally have a problem with closing too early. I have to train myself to weather the pull backs in favour of the price action and of course the trend.
Over trading is huge problem. Thanks for the advice
fantastic article as always
This makes a lot of sense.
Great advice as always!!
This will help me a lot ,thanx
Another very useful article concerning forex .
Many times I agree being simple is the smartest approach in life and in trading! Cheers!