I want to share with you a sagely trading secret. Many wise traders will tell you that the ultimate ‘state’ to trader to enter – the trading ‘nirvana’ that we should all be striving towards – is boredom. But how do we achieve this and the resultant success in trading, when it’s such an exciting adrenaline-filled way of making money?
Let’s take a look at our trader in this nirvana-like state.
What is the secret to trading success? Meet our Zen trader…
Planning, research and analysis are the focus of his time and effort.
This trader has a plan, with which he is thoroughly familiar. In any situation, he knows exactly what he will do – there are no surprises, there is no adrenaline rush.
When the trading day begins, our trader is ready – he has his plan, he is calm.
He is sensitive to market behaviour. He doesn’t need to know what the market will do next, because he knows how he will react to anything the market throws at him. Having all eventualities covered means that he is confident in his ability to react correctly.
Sometimes this means that there will be long periods of watching and waiting. When an opportunity presents itself, he acts decisively, without hesitation. When no opportunity presents itself, he waits it out.
When he’s called on to exit a position immediately because of an unexpected development, he does so – there is no hesitation, because he is protected by his rules and his discipline. Our Zen trader understands loss and accepts it as a natural part of the business of trading.
He takes winning and losing trades with the same degree of impartiality. He does not connect performance with self-worth. At the end of the day, he knows that he has traded well according to his rules. If adjustments need to be made before the next day, he does what is necessary.
Adrenaline junkies beware
Is this Zen trader me?
Is it hell!
Just writing these qualities down reminds me of all my inadequacies as a trader – all those human foibles that can make my trading more like an emotional Alton Towers than a weekend yoga retreat.
Of course, we’re not robots, so to have any hope of getting close to our Zen trader, we need to do constant battle with our human frailties.
And the first step in that battle is to look them squarely in the eye.
I’m talking about anger, confusion, hopelessness, fear, euphoria, excitement, greed. And where do these emotions come from? They stem from the uncertainty of the markets.
And while reading a shelf-load of self-help books about trading psychology may lend us some reassurance that we’re not alone in having these weaknesses, it won’t make that uncertainty go away.
The best way to combat it – is structure and planning.
Having trading rules and plans that you trust are what will set you on the path to trading enlightenment (or boring geek-dom, depending on how you look at it)!
The disappointing truth about trading
So, here you are, with your trade moving in the direction you want it to … you’ve good risk control in place … your staking levels are sensible for your money-management strategy … all is as it should be.
Boring, boring, boring…
If you want drama and excitement – I’ve two suggestions for you: either you take up sky diving, or you get used to losing money.
If you want to make money, then you need to forget about adrenaline rushes, and start thinking about rules and discipline.
The secret to being a really successful trader is to master a few trading set-ups, and repeat them over and over again… It may sound dull, but your trading balance will be anything but!