A Teen Trader is an educational Site Only, The contents included in this website is not investment advice and are not meant to be taken as investment advice. Risk what you can afford to lose
Overview: In this article we will be looking into the most critical aspects of the mentality when trading the world markets. We will look into how to mentally manage risk, loss, and greed.
I have gotten hundreds of questions regarding how to be able to mentally take losses, how to overcome fear, and how to have a “traders mindset”. I have found, just as in any aspect of trading and business, people reach out too me looking for an easy solution to heal their pains or losses. Unfortunately it doesn’t work that way, I can’t give you a singular set or solution that will instantly cause you to effectively become better at taking losses or overcoming fear. What i can do is set out a blue print on how I think about these things that will guide you along your path to able to have a “Trading Mentality”
The Truth
What i have found is that one must be aware of all of the circumstances that they are putting or going to put themselves into. They must understand all of the risk that may come with an idea or trade. The best way to overcome it is to not underestimate your abilities, but again understand your circumstances. For example, if you wake up and you want to go to the beach and expect it to be a perfectly sunny day, but instead when you get to the beach it is extremely cloudy and rainy you will be depressed and complain about all of the time you have wasted. The issue is that you expected a specific outcome without realizing what different outcomes could occur, you didn’t look at the news and see that there is a high chance of rain. If on the other hand you saw that there was a high chance of rain and you still took that “risk” you then will not be very depressed because again you expected that outcome to be highly likely.
Trading is the same, you have to understand that you WILL lose trades, you will be extremely wrong, and you will time to time fall subject to manipulation moves. I have, you have, we all have and will continue to. This is why in all of my videos, articles, and Instagram posts i heavily stress that everyone should take time to understand how the markets move. Look into how manipulation forms, back test strategies and understand the likelihood of winning throughout x period of time.
As you can see above with the graphic i made, the likelihood of on a decently large losing streak is virtually guaranteed. I categorized a red or “nearly certain” as anything above 50% chance, anything less than 25% is considered as “great odds” and anything in between i consider as “decent”. The reason i bring this graphic up is because of how people get discouraged after losing 2-4 trades. It is part of the game, understand that. Review losses and use them as a stepping stool to improve.
Know Your Craft
When attempting to fully understand and be prepared for each and every outcome that a trade may have it is very important to understand the ins and outs of the strategy that you are attempting to use. Understand how FTBs, FTRs, or RBRs work in all aspects of all market conditions. Understand what market structure is and how it can change. Understand what the current news bias is and how that is causing price to move within your market structure. Continuously practicing and perfecting your craft will allow for you to better understand the various outcomes that you can expect or see happening in a day by day market.
Learn and Improve
When I see traders taking loss after loss and coming into my messages asking for help, they don’t learn from their lessons. When you take losses, when you don’t pay attention to news and that causes losses, or when you risk too much on a single trade you have to learn from that and use it to improve! I can’t stress that enough. Doing something that you know has not worked for you in the past is very unintelligent.
The “Game”
Most people consider trading a game, its not. A Game is something that you play for fun, trading is a business. A Traders goal is to maximize profits and minimize risks (costs) just like any other business model. Just like a business has a business plan, traders should have a trading plan that consists of rules, guidelines, and principles that they follow. In the future i will make an article about how to effectively make and follow a trading plan.
Conclusion:
To conclude, understanding the overall risk that you are taking on, understanding the news that is set to occur, and understanding the possible outcomes that can occur while in a trade will make you overall have a better “Traders Mentality.” If you are to only take away one things from this it should be that no matter if the fear is entering, losing, or the fear of the unknown the only way to fix that is to allow yourself to know all potential outcomes to the best of your abilities.
I truly love this article. I feel like this should be every traders guide because I was once that trader that either over leveraged and did not have a trading plan. For the past month my trading wins vs. loss has increased. Last week my trading ratio was 7 out of 8. I went back to study why I was not profitable in my 1 loss, it was because I did not stick to the plan. Sticking to a trading plan is crucial like you have mentioned in this article. Looking forward to reading up on all of your articles. Keep up the great work.
Traniece,
Exactly! Thank you so much for the kind words and feel free to reach out with any further questions!
Regards,
A Teen Trader
thank you