The goal in trading is to develop not perfect systems or perfect outcomes but prefect self-trust.
The “ideal trading mindset” is talked about a fair amount but never clearly defined. It’s a mist. An esoteric concept that some traders seem to find from time to time but others look at empty handed, through fogged glass.
The ideal trading mindset is simply a mindset that is aligned with the realities of trading. This is obtained only through the development of advanced self-awareness and, when complete, produces prefect self-trust.
Here is an example.
I don’t always win. In fact, I lose plenty.
I have perfect trust in myself to :
- Not lose more then I set to lose.
- Adjust to new conditions as they arrive.
- Take advantage of the current opportunities to the best of my ability.
That might not sounds like much to new traders. If you’ve been here a while, those three things should be recognizably important. Pretty much the whole game.
Perfect self- trust is built through clarity of system and self, paired with focus on intention and actions. Both system and intention must be clearly defined in every detail. This produces our process which is aimed to align ourselves with both system and intention.
CLARITY:
- Who am I?
- What drives me?
- What are my tendencies?
- How do I see the world?
- What are my triggers?
- What are my core motivations?
- What are my red flags?
- What pays my in markets?
- What are my trade triggers?
- What are my setups?
- How do I know if I am mentally ready to trade today?
- How do I know the market is aligned to my method today?
- What should my trading look like vs what does it look like?
FOCUS :
We all have an assortment of noise. The opposite of mental noise is focus. The amount of mental noise we bring into our work determines the purity of the output. Said another way, the more we reduce noise, the more closely we come to executing in line with our intentions. Both a cone and a spear come to a point. However, they are functionally very different. The goal is to navigate through the noise, discard it and become the spear.
The Cone : What I would like to achieve today – What everyone else did – What I think about myself – What money means to me – My wife/husband’s thoughts of my trading – Qualities of my personality not aligned with the work – What I need to prove to myself – Feeling smart – Feeling cool – Insecurity.
The Spear : What I intend to do and how I intend to do it.
The cone, while it has a point, brings along a load of baggage. A lot of noise.
What I intend to do and how I intend to do it.
This is all we really need to know. The trouble is, we spend too much time in the noise. The noise of our own minds.
We must navigate out of the noise until we find ourselves at the top. Then, like a rocket bound for mars, we must detach the extra fuel cells and fly ultra light towards our destination. The first time we do this, it may take six months. The second, a few days. After a few laps, this is our process and it take minutes.
This is the product of good trading. It’s not money. It’s the ability to move up the cone and arrive quickly at “What I intend to do and how I intend to do it. ” in any area of our lives. This is the art.
Why do traders trade well and blow up randomly?
They know how markets work but have not developed a level of self awareness that is capable of creating the clarity and focus that produces a pure output. They are taken over by the noise.
Their intentions are unknown to them and they are simply acting on reflex and not process driven intention. Simply put, there is too much noise in their system and mind so that the moment reflex fails, they spiral. Understand this : many have “a process”. They just don’t have their process. They don’t have the method that moves them up through the noise into focus and clarity. Instead they have standard for drawing levels.
Their software is built on the wrong assumptions and must be rebuilt again. Correctly. Not built on market dynamics but on their own, internal dynamics.
We often look for nuance in how markets move. Markets can be systematic. The nuance we need is for the observation of ourselves.
Only when we overlay high quality market dynamics onto a foundation of deep self-awareness and process that is designed by us to move us into focus and clarity will we begin to see the long-term results we’ve been aiming for.
Losing is a skill.
If this all sounds too “in your head” it’s because it is. There is a very large amount of meaningful work we can and should do between our ears. However, in more practical terms, we simply need to practice losing.
Walking away red is a skill. Taking a stop is a skill. Sticking to your system and setups while in drawdown is a skill. Most traders have too much mental noise to even begin to see it this way. That is simply what it is. To get better at any skill, you simply need to create a method for clear and focused practice.
Also like any skill, doing it wrong for a period of time embeds bad habits into our method. Often, traders mental is so cluttered and crusted up with artifacts that don’t matter, they can’s even start to sort through it to find what perfect practice would look like.
Until you have the skill to lose, put yourself in a position where you can lose. Most traders put themselves up against the wall. They are too big, have too high of expectations and ultimately put themselves in a place where they have to sink or swim.
In markets, when it comes to sink or swim, you will always sink.