Thought process of Professional Traders

Most people enter trading with the idea that they are going to make a lot of money. In other words, they have high expectations.  There is nothing inherently wrong with that idea. In fact, we need motivation, and making a lot of money can be a great a motivator. Unfortunately, many traders also have low self-confidence. And are not profitable or not trading at the level they desire or are capable of.

This is a fairly common condition that can be expressed in the simple equation:

High Expectations + Low Self-Confidence = Poor or Inconsistent Performance.

As a trading coach, part of my work with traders involves changing the equation,

High expectations are replaced with a focus on executing one’s trading process

Low self-confidence is replaced with high self-confidence.

The new formula becomes:

Focus on Process Goals + High Self-Confidence = Better and More Consistent Performance.

I’ve been reading Mike Bellafiore’s excellent book, “One Good Trade”, and the book seems to be saying the same thing. In fact, just reciting the title, “One Good Trade” as a mantra (repeat it over and over) while trading seems to have the effect of pointing one in the right direction of focusing on executing or following the correct process while remaining flexible and realistic with expectations.

This approach accomplishes a number of things, and helps to operationalize what I mean when I talk about focusing on what we can control and letting go of the rest.  It is also a good example of one of my rules in action, that we must be rigid with risk but flexible with expectations.

Trading well over time requires that we control what we can and let the market do the rest. In other words, we control the risk and are flexible with expectations by accepting the fact that we must adapt to what the market is doing regardless of our wishes. When we do this consistently, we build self-confidence over time.