Self-Confidence In Trading

Every trader wants self‐confidence and every trader seeks to gain more of it. As one trader said after missing a trading opportunity, “If I just had more confidence, I would be trading better.

Common Phrase we will hear many traders speaking this.

So What Exactly is Self Confidence in Trading


Early in my trading career I Vividly remember 2 incident which happened when I was getting trained by my Trading Guru

He was highly skilled in reading a chart and executing trades, and he had a healthy self‐assurance that was easy to see. He entered a short trade, which quickly turned down. Profit built rapidly. I almost jumped out of my chair in excitement . He looked at me with a bemused expression and said,

“Why are you so excited? It’s only a trade.”

I realized that he would have reacted the same whether the trade was profitable or not. Although he didn’t say it, it was clear that his confidence came from his knowledge, skills, and abilities, not from the profit he made on any given trade. As a punishment of showing overexitment I was not allowed to come in his office for 3 days, It was a very Big Lesson for me.

Another Incident was Just like it happened Last Friday He was long in market and just out of no where a wave of selling came and hit his SL. Price Declined but recovered almost immediately he did not show  any kind of remorse or frustration and

Just told 4 simple word “It’s only a trade”

This is one of the most valuable lesson learnt everyday is unique and “It’s only a trade”. A Single trade cannot define my trading so profit and loss just become immaterial.

The trick is to trade with confidence and he explained me there are 2 type of Confidence

1. External confidence
2. Internal confidence

Characteristic of External confidence Traders

a) These Traders base their confidence on things not in their control, such as the money they make or the number of winning trades.

This type of confidence will not last long and one of the reason for traders to bust there trading account.

Eg A trader is on Cloud No 9 because he just had a quiet significant money in day trading. He feels great and his confidence is soaring. In fact, he feels invincible, as if he cannot lose(Many of us has gone through this phase.) But this kind of confidence is hollow because it comes from outside the trader. His confidence comes from the amount of money won on an extraordinary day.The same trader will lose out that money im next few days.

What will happen the next day if he doesn’t make as much money or the day ends in loss? Where will his confidence be then?

When we allow our confidence to be based on things outside of ourselves we subject our confidence to the vagaries of things beyond our control.

Professional trader will not want her confidence to be dictated by unpredictable or things not in there control like
1. How much money was made today,
2. How many winning trades we have,
3. Whether we are up or down on the day,
4. What is my accuracy etc..

When your confidence is based on the results of your trading it will rise when results are positive and fall when they are negative. Traders—like any performer—can experience a temporary slump.

As the old age adage goes ” Form in Temporary Class in Permanent”

Lashing your confidence to money, winning trades and other things not under your control puts you in psychological trouble. You place yourself on an emotional roller coaster that will
be thrilling at times when your trades are working, you are making money, and the
market is behaving favorably, and harrowing and emotionally distressing when trades
are not working or the market is acting unfavorably.

With confidence misplaced on external factors you are much more likely to act erratically (e.g., force trades, over trade,and the like)when things aren’t going so well as you try to regain the positive,confident feelings you had when your trading was better. Note once again that you
are trading your emotions not the market as you try to recapture confident feelings.

But forcing trades, over trading, and other erratic actions will only serve to further erode self‐confidence. Given that there are many trades that don’t work out, markets that behave erratically, and many events in the market that seem capricious and unpredictable, it doesn’t make sense to base confidence on external factors. Relying on external factors for our confidence is shaky at best.

To Be Continued

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