Psychological Issue #3 in Trading: Lack of Confidence
In trading as in life, how you think determines the results you achieve. Many traders
are filled with doubts and a lack of self-confidence, so you need to coach yourself
through tough times with positive and self-motivating beliefs. Check to see if you
possess the traits and beliefs of winning traders, including:
1. My trading objectives are perfectly clear, and I truly believe I will achieve
these goals. If you have the belief that you will win, you increase your chances
of trading to win. In order to have this level of conviction, you must have
a thoroughly tested plan. You also must have a clear vision of how you will
proceed with your plan in order to reach your goal. The more you can visualize
your goals being achieved, the more you will strengthen your internal belief and
confidence that you will reach your goals.
2. I have created a plan to achieve my trading goals. I’m sure you’ve heard the
saying “I didn’t plan to fail; I failed to plan.” Without a plan, your results will
tend to be mixed and uninspiring. Commit to writing down your trading plan
and reviewing it regularly.
3. I prepare my plan before the trading day starts. If you don’t have a plan of
action once the trading bell rings, you are moving from the proactive mentality
into a reactive approach. I contend that the more reactive you become, the more
you will get in late to market moves and dramatically diminish your rewardto-
risk ratio. I prepare after the close for the next day’s trading, seeking to stay
proactive and a step ahead of the rest of the crowd.
4. I regularly monitor my trading results to measure my progress toward my goals.
Trading results tend to follow a zigzag approach similar to how a plane is
guided to its destination. At periodic steps along the way, if a pilot is off course,
he will set a new course towards the target. This is called course correction.
Once you have defined your trading target, your periodic evaluation should
lead you to assess what is taking you off course and encourage you to make the
necessary corrections to get you back on target.
5. I quickly discard negative emotions that can hurt my trading results. When
you lose, learn from the experience and put it behind you. You cannot afford
to dwell on a loss once the trade is complete. You have to have total focus on
the new moment and forget about the past, save for the time you allocate to
evaluating past trades (which should be done outside market hours).
6. I am focused on the market during the trading day, and not easily distracted by
non-market activities during trading hours. This can be a tough one for many
traders who have many responsibilities. If this is the case, define the time you
will be focused on the market and make arrangements not to be interrupted.
Price Headley is founder and chief analyst at BigTrends.com, which provides daily education and
recommendations for active traders of stocks, futures and options. He is also author of the investment
best seller, Big Trends in Trading.
