I found this book on the Traders Reality YouTube channel which is an excellent channel about trading psychology, so I decided to give it a try. This book did not disappoint. It’s short and concise just as I like it, with no refillers. Many of the lessons mentioned I’ve already learned the hard way, through experience. I hope some of you will have an easier ride thanks to this book.
These are my highlights.
Lessons learned
It took me eight years to realize the mistakes that I was making were bad habits instilled in my mind. I’d become great at practicing bad habits. It got to the point where my bad habits overshadowed my life. When things went wrong, I’d blame my methodology, my partner, my dog, even the weather. I needed to break the bad habits, but how? We’ll look at this a little later, but I can tell you that after taking steps to break the bad habits that were responsible for my repeated losses, I started seeing the benefits of my efforts.
To be successful, you must condition your mind to think like a robot.
The Importance of psychology
When a player is trapped in a Tilt situation it’s game over. They won’t think logically and will consistently make irrational decisions. Every move the player makes feels like the game is out to get them. This results in larger bets and holding onto cards they would normally fold. Tilt is detrimental for any poker player and it’s very similar to revenge trading.
Trading responsibility
The best way to become a responsible trader is with structure. It’s a trader’s responsibility to develop a system that allows him to approach the market in a systematic and objective way that will result in optimum performance. This can only be achieved if the trader has complete trust in their trading strategy.
It’s worth repeating that trading is hard, but that’s because as traders, we make it hard on ourselves by not giving our strategy a chance to work. We’re plagued with ‘what if’s, which in turn lead to the fulfillment of emotional triggers that make us behave irrationally.
Education over methodology
After five hours, I had an extensive list of additional courses that I could take and books that I could buy. That’s when I realized that the purpose of this seminar was to sell more products, not teach me valuable trading insights. I was not amused.
However, I advise you to learn about the markets, how they are constantly changing, and how systems have to adapt to the changes. Some will and some won’t.”
Even if you have the world’s most effective system, if you fail to develop your psychology, you will forever be system hopping. Addressing your psychology will improve your trading and keep you in tune with what the market is telling you every time you consider an entry.
Remember that trading involves sample sizes of trades and their outcomes. You’ll determine the effectiveness of a system if you produce a decent sample size. You’ll then be able to tweak the method to suite your personality.
It’s all in the execution
To become mindful of your faults and think of ways to improve your behavior, consider journaling. Many successful traders recommend journaling because it can show you a snapshot of what you were thinking at a specific moment.
Mind Every Time
Your job as a trader is to take what you can when your signals are triggered, not trying to guess the beginning or end of a trend.
Trading perspective
Do you have a desire to learn how the market works, or do you want to trade to impress your friends? Regardless of why you choose to trade, you’ll face many challenges that will test your determination and focus. If you’re only interested in feeding your ego, your journey will be short-lived.
It’s important that you take trading seriously or don’t do it at all.
The most difficult aspect of trading is maintaining a psychological state that allows you to adapt to changing market environments. Your skill is not rewarded in picking tops and bottoms, it’s rewarded by managing your emotions when your capital is exposed to the realm of uncertainty.
When you go on a vacation, you have a great time, get some rest, and enjoy it to the fullest. If you approach the markets this way, you’ll create a positive mindset that will increase trading longevity. There are thousands of strategies out there, so it’s important to be realistic and find something that fits your personality and keeps you in harmony with the rest of your life. New traders often worry too much about a strategy that makes them the most money as quickly as possible. This is a rookie mistake that will lead to heartbreak and a degradation of capital.
Putting it all together
The market doesn’t have feelings, it’s a machine. It’s designed to move dumb money to the pockets of the smart money. Winning traders are consistently rewarded for their efforts, analysis, and commitment. This is achieved by sticking to a strategy that matches their personality and staying humble. Winning traders are driven. They want to win in the markets, and it’s more about the process than the money. If you can fall in love with the process of trading like winning traders do, you will be on the path to success. Remember that trading is about one-third psychology, one-third system, and one-third risk management. If you don’t have all three in place, then none of it works.