Mental Toughness Required by Traders Part-III

In Continuation with Previous Article

Embracing Failure 

Failure has associations of negativity. However, failures are opportunities. Generate a feedback loop about your trading. Carry out post analysis every weekend. INCORPORATE it into your trading routine. While many see failures as extreme set backs, others see them as opportunities to learn and move forward. Nicholas Darvas was the master at this. He made sure he never repeated the same mistakes over and over again.

Half the battle is being conscious of what is going on in your trading. Some people do not know they are repeating the same mistakes over and over. If you don’t know about it, how can you fix it? How can you move forward.

Learning from mistakes can be a difficult task as we are forced to take responsibility for our actions/results. It is to easy to just pretend that they didn’t happen. However this is where the secrets about your trading lie, the cause of failure and also the improvement needed to move forward. All this is revealed in our own results.

Lets take a series of 10 trades. You carry out post analysis. You find that you traded your strategy perfectly on 4 of the 10 ideas. The other 6 ideas were traded on your gut, or the ‘need for action’. You look at your results and say OK 4 of the ideas worked because I bought them at the right time, coming out of a price consolidation where my risk was in check. The other 6 ideas, we traded on human error, the need for action, or a cheat buy not in a proper set-up. What exactly has to be done here in the future?

More self control is needed to follow the strategy. No doubt there is a lot of varied combinations. Your trading results could show that you are swing trading in bear markets, Taking a series of 3-4% losses on full position sizes, therefore giving back your gains for the year.

It takes a certain degree of honesty to look at your failures, but only truly knowing where you are going wrong can you improve in the future. There is no magic to this, no one is going to do it for you.

Changing our perspective 

Fully aware that mistakes are bad, failures are bad. Not allowed, taboo or whatever. In trading they are ALLOWED. It is OK to be wrong. You are wrong when you buy, your wrong when you sell. Fully accept this.

Take the trade, monitor the position and honor you stop. Plain and simple. When it starts to work, sell half at a decent gain and let the rest go. Scale in and out of positions, at least when your wrong, its a small position. If your proven to be correct add to it. Scale out of your position at a decent multiple of your risk.

Stop worrying about getting stopped out, stop worrying about stuff going up after you sell it. Big shit people. You will never, no matter how hard you try be able to nail the top / bottom and you do not have too either. It is our EGO that wants to be in early, nail the top or nail the bottom. Our EGO wants to be right! Hold that loss, ‘give it a chance’ Dont want to sell… might keep going.. conflict after conflict! Worry and stress. Lets forget about it. Follow the strategy and sound rules and just relax!

Happy Trading People!

Remember. Do not be afraid of being wrong, failures are opportunities.

Making money is more important than being right!

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