Let me start by saying that this post comes from personal experience. Everything here I have been or are going through. Psychology and mind set is just SO important in trading, probably more important than the actual trading system. So let's just start with this and then move from there. Psychology
If you think you are going to get rich from trading you are setting yourself up for failure
All throughout my life people has thought of me as a pessimist. I'm not. I'm just a person who understands scenarios in different situations, probabilities. I know this sounds weird but the easiest way to define this is that when facing a decision or a situation I have partial or no control over I always go with the worst case scenario in my mind.
This helps me on many levels to make the optimal decision for that specific situation which I have partial or no control over its result. This is why people call me pessimist. I call myself self aware.
By going into a partially clouded outcome with the worst case scenario in mind I will not blind myself with birds and bees and trick my mind into seeing the best possible outcome, which in a zero sum game is hardly the scenario that plays out. And this is why this is important. You have a defined set of rules to enter the market but the decisions that come after that are the ones you should look into. Please understand that I don't plan for the worst case scenario, my decision making process is not geared towards it; I just visualize it and accept it as a possible outcome. By doing this I detach emotions from the decisions I have to make once the scenario is in play. I'm talking about moving stops, scaling in and out, partial profits or manually closing losses. These decisions are what will make you or break you as a trader. Remember this. You all have heard of overcoming greed and understanding fear, and that's fine. The first step is to accept the worst outcome, be ok with it before even thinking about making that trading decision. Respect THAT process. Mathematics
The only thing we can control in this game is the probability of success of our setups
People that tell you that the price of any security will be at a given price in x period of time is lying to you. No one knows this. These people are basically telling you that they know future auction, bid by bid. This is just impossible. This is a game about probabilities and risk management. Math is what's most important in trading. If you don´t understand this, again you are setting yourself up for failure.
The reason profitable traders are profitable is because they follow a strict set of rules with amazing self-discipline. This is called a trading system or trading plan and it's nothing more than a a step by step flow chart of your decision making process towards risking capital for a possible return. Simple enough right?
Well it's actually not. besides from drivers in the markets using technical analysis based entries and exits is key because of market cyclicity. Because these setups will happen over and over this data can be minded over time and analyzed. This is what I call a profitability analysis.
With a big enough sample size of any given setups and its historic outcomes you can know exactly the probability of success of said setup. And this success rate should be minded by market, time frame and holding time. This way you have data to back up on why you do not trade certain markets or why you hold trades rather than cut them short. Math is king and the data is right there. All you have to do is collect it.
Even the smallest leak can sink the biggest ship
Leak finding and plugging leaks is key to long term profitability. Let me tell you a short story about how I figure this out. Starting up in this business by yourself is super hard, maybe one of the hardest things there are. That's exactly how I did it. I'm a self taught trader and I spent years testing and testing different types of trading systems until I slowly landed on the FXTE trading method.
When I felt comfortable with the trade identity I had landed on I saw that I was breaking even/losing money mid term and my equity chart was a disaster. I didn't understand why at the time because I did not journal my trades. By not journaling my trades I was taking lots of ''starter positions''. These starter positions were just small trades on the direction I intended to take the trade should all my rules play out. Because these small trades were taken with the normal step by step decision making process most of them were stopped out at a loss. At the time I didn't mind because they were just ''small starter positions'', but oh boy was I wrong. These small trades added up and ate big onto my hard earn profits making my overall trading unprofitable. Leaks. Find them. Plug them. Repeat.
Trading is not who you are, is what you do
You should treat trading like a business because it is a business, your business. And like any other business it will drain energy from you, in fact, much more than the average business.
This is a lot of business in one sentence.... but hear me out.
Trading is about making the optimal decision every time you are faced with one. You have to be cool headed, emotionless, disciplined, rested, healthy...
Take care of yourself, have a clean diet, exercise, have other activities like exercise, cooking classes, go out and drink with your friends (after this global pandemic is over of course). If you are constantly in front of your screens you mind will get clouded and you will slowly start making small mistakes, getting leak after leak without noticing it. This will make you unprofitable and because your mind is so clouded and your body so fatigued you are not going to be able to take a step back and fix this. It's a vicious circle I wouldn't send my worst enemy into. It's horrible and very hard to get out of.... trust me, I've been there.
This is one of the reasons I created the FXTE Method and started the FXTE community of traders. Here, we trade as a group with each other every single day and grow as traders together. Try it out, I know this is the place for you.