IRON MINDSET
A Guide To Building
Your Trading Mindset
by
MONEY TRADE EDGE
Iron mindset
Table of contents
1. TRADING........................................................................................................................................4
Participants.......................................................................................................................................4
Business...........................................................................................................................................5
Advantages and disadvantages........................................................................................................6
2. THE BIGGEST TRADING TRAP.................................................................................................11
Trading is a journey.......................................................................................................................15
3. WHAT IS TRADING SUCCESS?.................................................................................................17
4. TRADING TOOLS........................................................................................................................20
5. SYSTEM CREATION....................................................................................................................21
Find an edge...................................................................................................................................22
Test your edge................................................................................................................................23
Execute your edge..........................................................................................................................24
How to control your emotions while building your system...........................................................26
Misconceptions about trading........................................................................................................29
6. RISK...............................................................................................................................................31
Risk vs money................................................................................................................................32
Think in probabilities.....................................................................................................................35
7. EXECUTION.................................................................................................................................39
Analysis vs Trading.......................................................................................................................40
Practice through action..................................................................................................................41
Follow your trading rules...............................................................................................................42
100% focus on your system...........................................................................................................43
8. MINDSET......................................................................................................................................44
Trading vs any other business........................................................................................................44
Win 1 month vs Win 10 years........................................................................................................46
Consistency vs Perfection..............................................................................................................47
Long term vs Short term................................................................................................................47
You vs You / You vs The market....................................................................................................48
Process mindset vs Lottery mindset...............................................................................................50
Theory vs Practice.........................................................................................................................52
9. BUILD AN IRON MINDSET........................................................................................................54
10. SELF-DISCIPLINE......................................................................................................................57
How to develop self-discipline......................................................................................................57
11. CONSISTENCY...........................................................................................................................65
How to develop consistency..........................................................................................................65
12. CONFIDENCE.............................................................................................................................70
How to increase confidence in your trading system......................................................................72
How to increase confidence in yourself.........................................................................................80
13. FOCUS.........................................................................................................................................85
How to increase your focus...........................................................................................................86
14. RESILIENCE...............................................................................................................................90
How to develop resilience..............................................................................................................91
15. PATIENCE....................................................................................................................................96
How to develop patience..............................................................................................................100
16. INTERCONNECTION..............................................................................................................104
17. MATURITY...............................................................................................................................106
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No part of this guide may be reproduced, displayed, modified, or distributed without
the permission of the publisher.
Copyright © 2021 Money Trade Edge
All Rights Reserved.
Published by Money Trade Edge
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INTRODUCTION
Thank you for investing in this guide. You are probably not successful yet and you
want to improve your mindset but you don't know where to start. If you have any
doubts or questions, don't hesitate to contact me.
Many traders spend months and years, switching from trading system to another,
losing money consistently, without realizing that the main focus should not be to find
the perfect trading system, but rather to develop a good mindset to raise the level of
their trading.
Instead, they keep trying every possible indicator without real long-term progress.
Every person who starts trading has a desire to earn a large amount of money, but you
have to understand that you don't need just a trading system to be successful, but you
need to know how to execute your system, how to manage risk, how to manage your
emotions, etc.
Just think about it. If trading were so easy, then every trader would be a millionaire.
Disclaimer: Trading is an activity where 80% / 90% of traders lose money. Many
variables decide your future. The emotions, the risk and all the trades you take
depend on yourself and your mind.
This is a guide based on what worked for me and what worked for other traders.
Success is not guaranteed just by reading this guide.
I'm not responsible for your trades and for your results. You are the only one
responsible for your trades and your result.
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1. TRADING
The world of trading is completely different from any other business. You understand
this from day 1, when you open a chart and see different markets rising and falling
through bars or candlesticks.
Then you start discovering magic indicators such as moving averages or every
possible oscillator available and you are amazed at how simple it is to predict future
markets movements with these tools.
Obviously, trading is much more than that. You don't immediately become successful
after using a few fancy indicators here and there. There is so much more. But you
will eventually find out too, if you are willing to show up for long enough to become
a successful trader.
However, the possibility of making money (potentially a lot of money) with just a
few clicks and only with a computer plus an internet connection is one of the reasons
why many people decide to start their journey.
Participants
What people usually don't realize is the fact that the market is made up of a huge
amount of traders. Huge means that every retail trader is simply a tiny insignificant
speck in a big environment.
In the trading market, every day, some traders make money and some traders lose
money, simply because it is a zero-sum business. But that shouldn't bother you
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because you are just a tiny speck, so there is an unlimited source of money available
for you.
Every trader has a different system, a different way to trade, different ideas and a
different mindset.
Two traders can win the same trade with a completely different system.
Two traders can win and lose the same trade with the same system.
In fact, to succeed in trading it's not a matter of finding the best trading system, but
rather about developing the best trading mindset.
Don't get me wrong, a trading system is very important. It's your weapon to fight in
the market, it's your tool to win trades, but at the end of the day the most important
thing is how you execute your trading system and your execution depends solely on
your mindset.
All of this to say that your mindset determines your trading success. There are many
successful trading systems. Some are more profitable than others. But there are
different paths to becoming a successful trader. There isn't just one. There is no magic
formula.
Business
One of the biggest mistakes new traders do is thinking that trading works like a
lottery.
People outside of trading talk about trading using words like "gambling", "playing",
"luck", etc.
So, there is this common thought that trading is like going to the casino to play the
roulette.
Sure, many people approach trading in the wrong way, risking a huge amount of
money without the proper skills and without a proper strategy, but that doesn't mean
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every trader approaches the business the same wrong way.
Just think of any business. Do people start a business knowing nothing and taking
stupid risks hoping to get lucky? Maybe some people do, but they eventually break
down in the long-term.
Trading is the same. You need to develop skills. You have to build a profitable
system. You need to build a solid strategy. Some people need 1 year, some people
need 3 years, some people need 5 years, etc.
The sooner you understand that trading is a business and that there is no magic
system to be successful, the sooner you start building the foundation necessary to
become a profitable trader.
Advantages and disadvantages
Trading has many unique benefits that push people to start their trading career, but it
also has several downsides that traders don't take into consideration.
Let's start by analyzing the benefits first.
If you become a successful trader you could:
• Trade where you want
• Trade when you want
• Working without a boss
• Working without clients
• Compound your money like no other business in the world
You can trade wherever and whenever you want because you only need a computer
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and an internet connection.
Many people may disagree with this, but they probably don't know what they are
talking about.
With just one PC you could trade one month in Europe, one month in America and
one month in Asia. Of course if you need 10 screens to trade, everything gets more
complicated.
Working without a boss and clients is quite intuitive. If you are an independent trader
you are your own boss and have no clients to respond to. In simple words, you
manage your work. If you want to work 16 hours a day you will work 16 hours a day.
If you want to work 1 hour a day, you will work 1 hour a day.
In the long term, no activity equals the compound effect of trading. In fact, there is a
double compound effect, on your money and on your skills.
The compound effect on your money is quite intuitive. While in trading you
consistently make money, compounding month after month your money, in other
businesses your earnings do not increase exponentially.
Without taking in consideration the average 9-5 job, just think of a restaurant.
Month after month, the owner of a restaurant earns roughly the same amount of
money. The owner can increase the gains through expanding the restaurant, hiring
new workers, acquiring more clients, raising prices, etc. But the earnings will never
increase as exponentially as in trading.
The compound effect on your skills may be more difficult to understand. This is why
many traders quickly give up in 6-12 months if they don't see results.
Day after day, you practice, work hard, build skills. You may not see the results of
your work in 1 day, 1 week, 1 month, but if you are consistent, suddenly you will see
aha moments in 2-4 years.
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You can lose, you can make mistakes, you can fail, but in the meantime you gain
experience.
To make you understand the compound effect on your skills, just think about the
owner of a business hiring new workers. The owner invests time and money to train
the new workers. In fact, the higher the level of the worker, the greater the benefits
for the company. But what if after 3-4-5-6 years a worker decides to leave? The
owner must find a new replacement, starting over from a basic level, investing more
money and more time to train the replacement.
As a trader, you don't leave. Unless you decide to give up, but that's another topic.
You invest money and time on yourself and you develop your skills day in day out.
Your level starts at 0 and increases day by day.
The level of workers in a company can go from 0 to 100 really quickly, but new
workers periodically lower the level.
Let's take a look on the downsides of trading.
In the process of becoming a successful trader you could:
• Suffer loneliness
• Have emotional breakdowns/pain
• Be demotivated by overcoming the learning curve
• Spend a long time without earning money
Loneliness is one of the biggest problems in trading. If it takes 3-5 years to become a
successful trader, a new trader will take 3-5 years of training, practice, working alone
rather than with other people like 99% of average jobs.
By the way, you are not alone, you are with your thoughts, emotions, ego, etc. And
this could be a good or bad thing.
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By living with your emotions, you can learn how to deal with them, how to master
them, becoming a stronger person, not only in trading, but also in life. Indeed, when
you learn how to master your own emotions, you become limitless. You gain
confidence, discipline, self-belief and you live your life without fear.
On the other hand, spending all this time alone with your thoughts can drive you
crazy. That's why groups like trading communities are always helpful.
Emotional pain and emotional breakdowns are the real tests of trading.
The human mind is capable of making / destroying your future. Most traders who
start trading risk a lot of money without taking in consideration the consequences of
their actions. When you start losing money, your mind starts getting hurt. The more
you lose the more you get hurt, until an unexpected event like a catastrophic loss or
blowing up your trading account hurts you so much that you can no longer trade.
Many traders start strong but then they disappear shortly thereafter.
Trading is a highly competitive business in which only 5-10% of people eventually
succeed. So you can understand that to achieve the highest level you need a lot of
training and experience. You definitely can't be successful in 90 days.
The more months that go by once you start trading, the more chance you have of
giving up because you don't any see improvement. In fact, traders' motivation
decreases over time if they don't see results, until sooner or later they decide to quit.
Money is probably the main trading problem.
Many people start trading because they are attracted to money. They think trading is
like a lottery, where you just need a magic formula to turn $ 200 into $ 2.000.0000 in
2 months.
They are very motivated in the beginning, they want to become a millionaire, they
dream of being super rich and they start working hard with the main goal of earning
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money.
In the end, these people are the first to quit after a lot of lost money.
Again, trading is a business and like any other business you need time to develop
skills and experience. Only after that you will start earning money.
Because of this, you could go years without earning any money.
Are you willing to spend 3-5 years working hard, making sacrifices with the
possibility of not seeing results or money for that amount of time? If the answer is
yes, you can have a chance to become a successful trader. If the answer is no, don't
start trading.
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2. THE BIGGEST TRADING TRAP
The first thing you usually do in trading is to look for a trading system. Many novice
traders have a school mindset, not a trading mindset. So, the more you know, the
more tools you use and the more effective you will be.
This is where traders start to study every possible indicator available on their
platform. On the other hand, you have so many indicators to choose from for your
charts that not using at least 2 or 3 of them seems the dumbest thing you can do.
If it is true that the more tools you use, the more effective you will be, then a trading
system is the most important thing and the better your trading system the greater your
success will be.
The first weeks/months as a trader are usually the weeks / months when you are most
motivated. It is a new adventure, you are thrilled, you are probably hungry for money
and you think you can do anything. For these reasons you are willing to do a
tremendous amount of work, with the goal of making tons of money or achieving
financial freedom in your mind.
A brief narration of the trading journey of many (if not most) novice traders.
They spend all their time on finding the perfect trading indicator or indicators for
your trading system. If you think 90% of your success will come from your trading
system, then why bother with anything else?
They probably start with moving averages because they are so fascinating. Putting 3
or 4 of them makes your charts really cool. They start testing every possible moving
average. 20 periods, 50 periods, 100 periods. "No, maybe 99 periods is better", "98 is
cooler", etc. They start seeing some good signs but they need a filter. They start with
the oscillators. "RSI is interesting, but stochastics is more interesting because it
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moves faster. Also the MACD is interesting with those histograms". So they add 2 or
3 oscillators. But then they see that something isn't good on their charts. So it's better
to remove a moving average by adding some bollinger bands. Now their charts are
perfect. The only downside is that they have to look at too many things to take a
trade. They win a couple of trades but then they lose a few. So, "Something is
wrong". "It's better to remove the stochastics by adding the CCI. MACD is
untouchable because histograms makes your charts really interesting".
And here we go, over and over. They repeat this pattern pretending to find the holy
grail. In fact, they've seen a couple of screenshots in some forums where a magic
indicator has won all the trades.
This scenario repeats itself over and over again for different times. It can be months
or even years. Until they realize that they can't become a successful trader with just
one trading system. There's much more than that. And this is where your real trading
journey begins.
Now, there is nothing wrong with indicators. Almost all of them were created for
specific purposes and many of them can be a successful tool in your trading arsenal,
in the right context. The wrong thing is putting a bunch of indicators on your charts,
pretend they will work all together, change indicators at the first losses, repeat this
process over and over, without moving forward on your journey.
Continuing like this, your journey is something like:
1. Test/Trade
2. Win/lose
3. Starting from 0 with a new system
4. Repeat
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While it should be like this:
1. Test/Trade
2. Win/lose
3. Get feedback
4. Learn
5. Repeat
This is the period where most traders quit trading. Most traders have a hard time
finding a profitable trading system because they are unable to change their mindset.
Some traders lose over and over again until they can no longer tolerate the losses and
are forced to give up. Some traders, instead, are forced to change their approach to
trading to have a chance to become successful traders.
It's not the system. It's the mindset.
The main character of your trading journey is your mind. More precisely, the
emotions in your mind. The best trading system in the world is not a "become a
successful trader" ticket. Without the right mindset, the best system in the world is
pretty useless because you can't execute it.
But why your emotions are so important? In trading, your emotions are critical
because they affect your execution and trading success is 99% execution. This is why
most traders who are successful on a demo trading account, will not be successful on
a live trading account (at least not immediately). On a demo trading account most of
your emotions are not involved.
Your mind usually doesn't like to lose. Losing money even worse. Hence, the average
trader who does not have his emotions under control will have a lot of difficulty
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managing his trades when price is against him. The trader will be more willing to
break his rules, his stop losses targets to let his losing trades run because taking the
loss is always painful and he thinks that the trade could always turn in his direction
eventually. You may get lucky once or twice but in the long term this will always be a
bad move. Also, by continually breaking your rules, you consolidate the pattern of
not trusting your system and yourself.
The same sabotage process happens when you are in a winning position. The average
trader, who does not have his emotions under control, will be forced to close his
winning position early for the simple fact that his mind hates to leave money on the
table. He will start thinking "what if price retraces without hitting my take profit?", "I
can't leave this money", etc. The final result is the same of the previous one with the
losing trades. The trader breaks the rules with the consequence of doubting his
system, his abilities and himself.
Many similar examples happen every day in traders' minds, ruining trades,
performance and to a greater extent self-confidence.
Fear, greed, anger, pride, revenge and many others constantly affect traders, forcing
them to execute their systems and their plans very badly. The human mind is a very
complicated machine. You cannot know exactly what will happen next if you are not
in control.
Unfortunately, many traders make the mistake of thinking that the trading system is
more important than emotion control, ending up with bad emotional breakdowns until
they realize that emotion control is much more important than the trading system.
Learning to master your emotions takes time. You can't expect to understand
everything about yourself in 3 months. Nothing is impossible of course, but to
understand this mechanism, the usual process is: Observe → get feedback → learn →
repeat and this usually takes some time to digest what you learn.
That's why trading is a journey and not a get-quick-rich scheme.
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Trading is a journey
The best approach you could use is to take your trading career as a journey, where
you start from day 1 with nothing and you discover yourself along the way. Trading
works as a business, like any other business, so you can't pretend to become a
successful trader in two or three months. You can certainly have great improvements
and great results in a short amount of time, but to reach elite levels you definitely
need more time for the simple reason that you need to gain experience. And
experience is not a cheap thing that you can acquire in a couple of months.
The main problem is that you are bombed with pictures of people in a Lamborghini,
in a swimming pool or in a cool place. These people tell you that trading is easy, it
only takes a couple of months to become a millionaire, you can't lose, etc.
More and more posts from people telling you they have a system with a 95% win
ratio and 1:10 risk reward ratio, things that obviously are impossible to be true.
For these reasons you will try to be perfect and to find perfection in your system,
while what you really need is consistency.
Winning every trade is impossible, because it would mean knowing the positions of
all traders in the world, and of course, it's not possible. That's why you should focus
on how you can improve yourself and your performance, day after day. It doesn't
matter how many times you win and lose. What really matters is how big your wins
and losses are.
So, don't worry if you can't make tons of money right away, in the short term. Worry
if you cannot develop skills and develop yourself as a trader. On the other hand,
money comes and goes, trading skills stay with you forever. Once you develop
specific skills, everything becomes easier.
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This doesn't mean that you should take your job easy. If you want to work hard on a
daily basis, do it. It will significantly reduce the time between you and success. Don't
expect to become successful overnight. Overnight success is usually 5-10 years of
work compounded over time.
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3. WHAT IS TRADING SUCCESS?
Trading success is a very subjective concept.
Many say you need this or that to be successful, but ultimately, trading success
depends on:
1. Goals
2. Ambition
On the internet and on common stereotypical social media pages you can see posts
like: To become successful you need to become millionaire before 35, you need to
buy house big mansions, you need to buy Lamborghini and Ferrari, etc.
Nothing more wrong than this.
In your life, everything is subjective to your happiness. If you are happy to earn
1.000$ per month on trading then you are a successful trader according to your
perspective.
Trading success is difficult to define. It is definitely being profitable in the long term.
But how much profitable really depends on goals, ambition and expectations of
traders.
You can be a successful trader if you are a part-time trader working in a regular 9-5
job, earning 300/500$ every month on trading, increasing your income.
You can be a successful trader if you consistently earn 2000$ every month.
You don't have to earn 20.000$+ every month to be a successful trader.
Your success depends on your ambition and therefore on your goals.
Of course, the higher your ambition, the harder it will be to reach your goals. Hence,
you will need more skills to reach more ambitious goals. You need to work harder,
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gain more experience, etc.
In trading, everything depends on you.
You need to find what works for you, based on your goals and on your ambition.
Remember that in the end, happiness is the most important thing. Being happy while
you work and train is important because your mind is on a different level than
someone else who works without being happy, therefore with less motivation.
Most traders who focus only on making money end up being the first to give up,
simply because, in trading, focusing on making money is the number 1 reason traders
don't make money.
That's why being happy to improve is a vital step to trading success. If you love the
process of becoming great you will be motivated every day to improve yourself.
Your goal is not to earn $ 1.000.000, but to improve yourself, your skills, your
experience. Money will come later.
Becoming a successful trader is a process that starts on your day 1. You can't expect
success in a couple of months because:
1. Trading success is measured in years, not weeks or months
2. Trading involves many aspects to master such as strategy, timing, execution,
emotion control, etc.
So, the sooner you start treating trading as a process of getting better day by day, the
sooner you can start getting better.
When you realize this, consistency in showing up every day becomes automatic.
Stop thinking trading is some kind of lottery.
To win in a lottery you need a huge amount of luck with a ridiculous chance of
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winning. If you are lucky enough to win, you will win once. Then stop. It's over. You
get the money and the game is finished.
Trading doesn't work like that.
To be successful you need consistent wins over the years. Pure luck doesn't help you.
You could win 1 trade, 2 trades, 3 traders, etc., but sooner or later your luck will fade
and you will be alone with your bad emotions. That's when you realize you need
more than luck to be successful in trading.
Stop thinking in days. Start thinking in years.
Trading success = Edge + Probability + Risk management
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4. TRADING TOOLS
The most important trading components:
1. Mindset
2. Risk/Execution
3. Trading system
Unfortunately, you start developing them in the opposite order.
Trading is like climbing a mountain. To get to the top you have to start from the
bottom.
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5. SYSTEM CREATION
Your trading system is your offensive weapon to succeed in the market.
The way you execute your system is critical, but in any case without a profitable
system you cannot be successful in trading.
Trading System:
• Edge
◦ Find an edge
◦ Test your edge
◦ Execute your edge
• Rules
• Plan
Quoting Mark Douglas, "An edge is nothing more than an indication of a higher
probability of one thing happening over another".
An edge is the most important element of your trading system. It can be different
things like a setup, a candlesticks pattern, a market structure, an indicator, etc.
To have a true edge you have to follow the quote of Mark Douglas.
If you can execute a trading edge over the long term, with a little help of some risk
management skills, you will start making profits.
The better your edge, the better your results.
The better your execution, the better your results.
The better your risk management skills, the better your results.
Trading success = Edge + Probability + Risk Management
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Find an edge
This is usually one of the longest and most difficult period of trading.
Traders approach this phase without much experience, so they can spend a lot of time
on wrong things, wasting time. However, this time will be helpful to understand what
works and what doesn't.
Lack of money and results at this stage can test the mind of a trader in the hardest
way, producing questions like "Why do I have to keep doing this if I don't see results
after x days / weeks / months?". The amount of work you do every day may help you
reduce the time it takes to find valuable setups, good signals and eventually an edge.
You should be careful however to not burn yourself due to the large amount of work.
If you work 14 hours a day you will surely tend to last less in the long term than
someone else who works 5 hours per day.
Some trading edges may be similar, but every edge is different from each trader's
perspective. Every trader has a different execution. Every trader sees things that
another trader doesn't see.
There are no shortcuts to finding an edge, unless someone else shows you different
edges, but in that case you should always do the work by testing, seeing what works
and what doesn't, etc.
Remember, in the end it doesn't matter if you have the best trading system in the
world, it matters only how you execute your trading system.
You can have the best trading system in the world but still lose because your
execution sucks.
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Test your edge
Once you find a trading edge, you still have a lot of work to do. Having an edge does
not guarantee you trading success. All this because you have to deal with your mind
and your emotions. In fact, there's a big difference between having an edge and
executing your edge correctly. There are many things you have to take care while you
trade, such as when you enter the trade, when you exit, your risk reward ratio, how
much money you leave on the table, how much you let your winners run, when you
cut your losses, etc. .
Execution is what separates amateur traders from successful traders. As soon as you
create a profitable trading system, everything can seem easy for you, especially if you
are trading on a demo account or a small account with little money. But you can
understand that more money you have at stake, the more you have to deal with your
emotions because the thought of losing a lot of money doesn't fit with your mind.
This is why you should test your edge before you jump hard to trade it.
1. Backtest in the past
• Test
• Learn
• Repeat
2. Forward test in the future
• Test
• Learn
• Repeat
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The first step is to check how market moved in the past. At this stage you should
incorporate all your trading and risk rules into your analysis. For example, you should
keep in mind that you have a risk reward ratio of 1:2 with a specific stop loss and a
specific take profit. You need to check how your trading edge performed in the past.
So you can see what worked and what didn't. Feedback after feedback you shape
your system.
The second step comes after you have good past data on your system. Of course, the
larger the data sample, the more accurate your data will be.
When you have a clear strategy on how to trade a specific market, it's time to take
your test to the next level.
There are multiple programs or websites where you can go back in the past and swipe
candle by candle in the future to simulate a live trading (without money and emotions
involved of course).
Backtesting is good, but it has a great drawback; the fact that candles are already on
your charts and you can't train your execution properly.
You can also trade on a demo account, but training is much slower even if it is a little
bit more effective.
Remember the sequence "Test / Learn / Repeat". Many traders make the common
mistake of testing without taking notes of their mistakes, continuing testing without
making big steps in their journey.
Execute your edge
The first thing to do when you are ready to trade live is to start small. When real
money comes into play, your mind starts to get affected.
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Your goal at this stage is to maintain the same level of execution moving from demo
trading (or forward testing) to live trading.
This is probably the hardest time because you have to deal with powerful emotions
like fear and greed.
It is quite logical that you can't control everything, so the best thing you can do is to
control as efficiently as possible what you can control, therefore your system, your
thoughts, your actions and your execution.
In doing this you need to adjust your level of confidence in yourself, in your skills
and in your trading system. You adjust your level of confidence by adjusting the
amount of risk you take for each trade.
That's why demo trading is always easier than live trading. Emotions are not affected
by money because you are not risking real money.
The aim, therefore, is to create almost the same conditions as demo trading and scale
up as you increase your confidence level.
• More risk → Less confidence
• Less risk → More confidence
If you can start by risking a small amount of money that losing would be insignificant
for you, then you could trade without being affected by the fear of losing money.
When you feel good about trading with that amount of risk you can increase it a little
bit, but always gradually. Continue this process until you reach the common % of risk
per trade ( 1 or 2%).
Remember, trading is a long game, so don't rush. Skills such as confidence take time
to develop.
Take your time to go through the whole process. This is usually the longest period for
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a beginner trader starting at 0.
You could spend days on a setup that looks good but then you realize it's not okay
and you switch to another setup starting over. Don't lose confidence and motivation in
this process, because it is characterized by many tests, many attempts and many
failures.
The difficulty of finding an edge for a trader is the first major test. A trader usually
starts with the idea of making tons of money in a few months, but then comes up
against the trading reality that success is earned through hard work, consistency in
what you do and a lot of self-discipline through the whole process.
The fact that most traders give up without even finding a trading edge shouldn't come
as a surprise. Many of them start to trade thinking that trading is a lottery, so as soon
as they see big losses instead of big wins they choose quit trading.
Others may realize that trading is not a lottery, starting the journey in the right way,
but they eventually quit after a few frustrating periods without seeing results.
Most people who are new to trading think that the hardest thing is to find a successful
system, but it actually is showing up every day until you find success.
How to control your emotions while building your system
As we said before, the biggest problem is your motivation when you don't see results
day after day.
Stress is the worst emotion. If you don't take care of stress, you will make your life
worse, destroying your productivity, your goals and therefore your dreams.
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The first thing to do to master stress is knowing how it is generated by your own
mind.
Many variables could be considered, but the most the most important are:
1. Amount of work
2. Quantity of results
Typically, the more you work on trading (but also in any other business), the more
you produce stress. That's why there are average work days of 6, 8, 10, etc hours
depending on where you live and which is why you may only work harder for a
period of time (working hard for 18 hours a day for 1 year is impossible for most
people).
Please, keep in mind that the important thing here is how you handle stress.
When you don't achieve goals or see results you can feel bad and lose motivation in
what you're doing.
This is entirely up to your mind. Some people, for example, may find more
motivation than others in their activities when they don't reach specific goals. They
see the goal as a challenge to do better next time. In fact, you can find lots of
inspiring stories about this. For example, people who have been rejected numeruos
times and ultimately succeeded after years of hard work and dedication, or people
who failed over and over and ultimately succeeded.
If then you work hard for a long period of time and you don't get results the situation
gets worse. You decide to practice 14 hours, studying, working hard every day, but
after 1 month you don't see results. Working without breaks builds up stress, day after
day. The stress gets bigger and the days go by because you don't meet expectations.
This is what happens to a good amount of traders in their early stages of their trading
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careers. Someone may find the motivation to move forward but someone else may
begin to doubt all the work they've done by giving up.
• More work → More stress
• No results → More stress
• Hard work + No results → More more stress → More willingness to give up
Your goal is to regulate the amount of work you do. In the end, it all comes down to
your ambition. If you want bigger results and bigger goals you will have to work
harder. You may have to deal with a greater amount of stress, but your ambition may
help give you guidance and motivation to succeed.
Stress can be derailed if you reprogram your mind in the right way:
1. Thinking long term is the best thing you can do. You don't become successful
in 30 days, but in 30/60+ months. So, expecting to make a big amount of
money in the first few days is the worst thing you can do. You just put a lot of
pressure on yourself with the risk of getting ruined emotionally before you
even start, if you don't keep up with your expectations. Create plans, create
strategies, create the process to become a successful trader and trust that
process.
Patience is the key to doing this.
2. Focus on consistency. No matter how hard you work, it just matters to be
consistent.
Working hard 1 hour a day for 1 week is better than working hard 10 hours one
day in 1 week. As long as you show up every day, you keep adding a little bit
of improvement every day. You may not see the improvements and the results
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of your work after 1 day, 10 days or 30 days, but suddenly you see them in the
long term which can be 3 months, 6 months, 9 months or more. It depends on
the trader. This happens thanks to the compound effect.
3. Choose your goals based on your level of happiness. Many people start trading
thinking they have to become the best trader in the world, making millions of
dollars every year. There's nothing more wrong than this. Becoming a top 1%
requires sacrifices that not everyone is willing to make. Successful trading is
not becoming a top 1% trader. You can be successful even if you have a part
time job and you earn consistently by being a part time trader. You can be a
successful trader if you are happy gaining 2000 / 3000 $ every month. There
are no reasons to live an unhappy by pursuing goals not in synchro with
yourself.
Misconceptions about trading
If you tell someone that you are a trader, the questions you usually get are:
• "When will you get a real job?"
• "Are you a gambler?"
• "Are you rich?"
• Etc.
There is this belief that to be a trader you have to have some sort of magic formula to
fool everyone and make money. You make millions or you are loser. You have it in
your DNA or you don't. There is nothing in between.
Maybe all of these misconceptions exist because when you have a 9-5 job, you have
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your guaranteed monthly salary, there isn't much growth (there is, but it definitely
isn't exponential growth like trading).
The reality is that trading is a process, from your day 1 to the very end.
Trading is like a mountain to climb. Just see the pyramid on the previous paragraphs.
You start climbing from 0, like everyone else, and day after day you discover new
things to add to your experience.
What you find and how fast you climb to the top is entirely up to you. The important
thing is to remember this and avoid thinking that trading is a sprint where in a few
days you understand everything and you become profitable and rich.
It sounds repetitive, but it's not. In fact, many traders forget this by acting the wrong
way. They don't develop a profitable system, they increase their risk, they blow
accounts over and over again until their emotional state is trashed and unable to
continue on this journey called trading.
The day you stop focusing on money is the day you start getting money.
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6. RISK
Focusing on risk has to be your #1 priority.
Risk is the main trading character. It's the main difference between trading and the
average 9-5 job. In a 9-5 job you usually show up to work, you do your job and you
receive a monthly salary. You generally don't risk anything. You can have a bad
performance and sometimes you get fired. You can have a great performance and
sometimes you get an increase in your monthly paycheck; but in the end of the day
you take your monthly paycheck without any risk.
Trading is different.
You live and you die taking risks. Without risk you cannot make money. Obviously
there is a big difference between a calculated risk and a stupid risk. In every trade you
take you risk a % of your capital to earn a % of money. How much you earn depends
on your risk reward ratio and your win ratio. The more you develop your risk
management skills the more effective your trades will be. Better entries. Better exits.
Better trades management. A great trading edge makes you a good trader. A great
trading edge with great risk management skills makes you unstoppable.
In a 9-5 job you use your time to earn money in a linear way.
In trading, you use your money to earn money in an exponential way.
After developing a certain amount of skill and experience, in trading you could
potentially earn more money consistently using a shorter amount of time.
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Risk vs money
The problem is that most traders don't focus enough on risk. Most of them don't care
about risk at all.
The main focus is on money:
• "I want to win a million of dollars"
• "I want to turn 200$ into 200.000$ in one month"
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Very few think:
• "I will risk 1% on my next trade"
• "With a 1:2 risk reward ratio I'll need a 33% win ratio to break even"
• "If I risk 1% per trade, I'll need x trades to reach y% by the end of the month"
Traders focus so much on getting more money that they lose focus on risk and they
end up losing more money. If you try, for example, to turn a small amount of money
(500$) in a large amount of money (500.000$) in a short amount of time (6 months),
you will be forced to heavily increase your risk.
A higher risk increases the chances of:
1. Higher losses
2. Emotional breakdowns
Trading is a game of probability. You can't win every time. You can't lose every time.
You can have a long streak of wins. You can have a long streak of losses. But
eventually the streaks will finish.
To be successful in the long term you need to be consistent over the short term. You
cannot pretend that 6 months are enough to build your trading account.
Going back to the last example, if you risk something between 10 / 20% of your
account per trade and lose, it will be much more difficult to rebuild your account with
such a small balance.
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Your emotions get involved because the more money you put on the table the more
your mind will be affected. With higher risk you tend to make more mistakes like
breaking rules, letting losers run and cutting wins too soon, ending up sabotaging
your plans and your system over and over.
Then if you lose more money you feel bad and you want to make up for this loss of
money immediately, so you may start taking bad trades (not synchronized with your
system) or worse risking more (revenge trading).
Greed is usually the #1 reason why traders fail.
When you start trading, the first rule is to survive.
You have to think about how to preserve your capital. When you have a plan to
protect your money you can start thinking about how to get more money.
In fact, most traders approach trading thinking it is a lottery so they focus entirely on
getting rich without developing any skill or plan for the long term, until they are
burned by big losses.
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A big part of these traders then continues to risk more and to blow more accounts
until they can't take it anymore and quit trading.
A small part, on the other hand, understands that the focus should be on something
else and they start thinking differently. These traders eventually become successful in
the long term.
The real benefits of a trader come in the long term, after years of execution and hard
work. Consistency is the real measure of success.
A trader who earns 3% each month will earn more than an inconsistent trader who
earns +10%, -9%, over and over.
Consistent gains → Consistent growth
Consistent growth → Compound effect
Compound effect → Trading success
Think in probabilities
This is the real tool you need to dramatically increase your risk management and
execution skills.
You know you can't win every trade because you can't predict the future. In fact, you
need a trading edge to be a successful trader. But if you can't win every trade, it
doesn't matter how good a setup is, but you could always lose the next trade. That's
why you need to execute your edge in the long term to see the results you expect.
Depending on your edge, you need to compete against market uncertainty and many
traders. In the short term, you may lose 1, 2, 3, 4, ... trades in a row. What matters for
you is what you get in the long term. Trading is a long game. This is one reason why
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risking 10/20% per trade, as in the previous example is most of the time a bad thing.
• Short term → Market uncertainty
• Long term → Your edge's expectation
Just think about tossing a coin.
You have a 50% chance of heads, but nothing can stop the coin from producing 5
tails in a row in the next 5 tosses.
The important thing to remember is that the more you flip the coin, the more your
chance of heads will approach 50%.
You can have a 20% of heads in the first 10 flips, but the probability will approach
50% as long as you keep flipping.
After 1000 flips you have a % of heads in the range of 49 / 51%.
Your trading edge is the same thing.
If your edge expectations have a 60% win rate, you shouldn't worry after a couple of
losses in a row.
In the coin example, the more you flip a coin, the closer you get to the tails
expectation, which is 50%.
At the same time, the more you execute your trading edge, the closer you get to your
trading edge's win rate expectation, which in this example is 60%.
Here come your risk management skills. You should take care of your risk for a
successful long-term trading career. You cannot pretend to be successful if after 3
losses your trading account is in danger.
The most common steps for setting your risk are:
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1. Decide on a risk % per trade (usually between 1% and 3% if you are a scalper /
day trader / swing trader).
2. When you take a trade, calculate your Stop Loss and Take Profit in pips.
3. Calculate your lot size through pip value, lot size and risk % per trade.
4. Repeat consistently for each trade
It all depends on the trader.
Someone trades better with lower risk, someone wants higher risk based on their
trading plan. Nothing is certain. There isn't just one way to become a successful
trader. Your choices and your decisions determine your future.
Remember, you can't win every trade. Otherwise, every successful trader would risk
much more than the average risk % per trade.
Don't underestimate risk management.
Risk management is what separates a good trader from a great trader.
A good trader can make huge profits over and over again, but lose some of them due
to poor risk management skills.
A great trader maximizes their wins and minimizes their losses using his risk
management skills.
For example, a good trader can potentially earn 5% on a monthly basis thanks to his
trading edge, but his poor risk choices will earn him 3%.
A great trader with the same trading edge, but with good risk management skills, can
match that 5% and even exceed.
A trading edge is good, but without risk management it's almost useless.
If thinking in probabilities should be your ideal mindset, then increasing your chance
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of success should be the first thing to do. That's why the risk reward ratio and the win
ratio come into play.
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
9-5 job 2000
2000
2300
2500
2500
2700
3000
3000
Trading 0
0
0
500
1500
3500
8000
19000
Theoretical example of the difference between the monthly salary of a 9-5 job and the
monthly salary of a trading job.
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7. EXECUTION
What is execution? Execution is the act of doing or performing something, especially
in a planned way.
We can say that trading success is 99% dependent on your execution. You can have
the best trading system in the world, the most detailed trading plan in the world, but
you will still lose if you don't execute your system and your plans in the right way.
Now let's put aside for a moment trading systems and trading plans to understand
how luck and skill affect your execution.
At the end of the day, if you make more money than you lose, you have a profitable
day. As long as you gain money you have a decent execution. Forget if you could
have made more money. If you finish the day with more money than you started you
are among the profitable traders.
However, in trading everyone can win or lose trades. You don't need specific skills to
take a trade and to win a trade. You just have to be able to use your mouse to click
"buy" or "sell". For this reason, a non trader can easily win one or more trades. You
understand that anyone can win large trades in one day. The problem comes when
you have to repeat that performance the next day, and the next day. A non trader can
also win trades for different days, for the same reason as before. Luck comes in his
way by catching always the right trades, until luck goes away and the trader cannot
have as profitable days as before.
In this simple example you can understand how uncertainty affects a trader in the
short term and how the skills of a trader will determine the trader's success in the long
term. The person in the example may have some luck in the uncertainty of the early
days. But then luck slowly goes away to make room to the skills of the trader.
This is why many traders can win for two or three months and then quickly decrease
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on their performance as months go by.
Trading success is a subjective concept, but it is determined in years, not in months.
You cannot pretend to be a successful trader just because you have a couple of
profitable months in your bag. Your success is defined by long term conistency. And
the more time you add to determine your success, the more your execution is affected
by your skills.
Trading success formula can be summarized like this:
(Trading system + Trading plan) * Execution * n days = trading success
n = number of days to define success
Trading success is 99% execution.
Analysis vs Trading
Traders often make the common mistake of confusing analysis with trading. They
spend most of the time analyzing charts, studying patterns and future possible
scenarios without acting when they should act.
One thing that many new traders apparently forget is the fact that they are traders, not
analysts. Otherwise they would be called analysts. There's absolutely nothing wrong
with analysts, in fact they have very useful purposes. It's just a critique of traders who
define themselves as traders and act as analysts. They use all their time to analyze
charts over and over without taking action. They enter a cycle where they continue to
take these actions without developing their execution skills which are critical to
becoming a successful trader.
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Doing a good analysis is a great step to execute your system in a good way, but doing
a good analysis without executing it in the proper way, it's almost pointless.
It's almost the same repetitive routine of traders who read and watch videos over and
over again, without practicing what they learn to improve themselves. If you don't
practice and apply yourself, you will never gain experience.
To improve your execution you need experience. To gain experience you need to
practice and learn things in real trading. You get experience by trading, not analyzing.
How to improve your execution:
• Practice through action
• Follow your trading rules
• 100% focus on your system
Practice through action
The amount of experience you gain and the amount of things you learn by taking a
live trade is dramatically higher than the amount of experience you gain and the
amount of things you learn by taking a demo trade or by not taking trades.
Taking a live trade forces you to face your thoughts and your emotions inside your
mind. This is something that you can't do without taking a trade or by taking a trade
on a demo account. On a demo account you take the trade either way, but there isn't
money on the table, so you will not really face your emotions.
Disclaimer: This is not an incitement for you to take random trades without thinking.
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Don't be stupid. Trade accordingly to your system and your plan. If you don't have a
profitable system, then go back and learn the steps to create a profitable system.
Risking money without the tools to compete in the market is really stupid.
The biggest obstacle is facing your emotions and learning how your emotions affect
your thoughts. If you can learn how to master your emotions with the consequence of
being able to execute your plans like a robot, nothing can stop you.
You can't learn how to master your emotions if you never face your emotions. So,
take your profitable system, take your plans and face your emotions. If you are afraid
start with a low risk. Don't be reckless. The number 1 rule of trading is always to
survive first.
Follow your trading rules
A trading system with rules has different advantages. This is not the place to discuss
whether or not a trading system should have rules. The important thing is recognize
the fact that the rules of a system limit the emotions of a trader. In fact, the main
problem is dealing with your emotions after taking a trade. Fear or greed may quickly
come in forcing you to break rules, letting your losers run or cutting your winning
trades too soon, ending up with a poor execution. For this reason, the stricter the
rules, the better your execution will be if you follow them. Obviously your rules
should be effective. If your rules are wrong, you can't expect to have good results.
But your rules are part of your trading system, so if you don't have good results you
have to go back to learn the steps to create a profitable system.
The ideal scenario would be planning the trades in advance, so you have only to
follow them to get the results you expected.
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100% focus on your system
When you trade, your system is your offensive weapon. So, when you trade you need
to focus entirely on it. You have to know it, you have to understand how it works, its
strengths and weaknesses. Only in this way you will be flexible enough to react to
good / bad scenarios. If you don't know how you should behave when "scenario x"
happens, or when "scenario y" happens then the odds will not be in your favor.
Remember that trading is a game of probability where you have to increase the odds
in your favor. If you can't control what you can control, it will be very difficult to be
successful in this business. Now you understand why changing system over and over
can sound good for you in the short term, but it is actually bad in the long term.
Don't focus on what others tell you. Everyone has their own journey. Don't compare
your day 50 with someone else day 1000. If you see someone else making a lot of
money, it is probably the result of many hours of work and dedication. That's why
you should focus on your system, your skills, your journey. You could use other
successful traders as inspiration to work hard on what you are doing recognizing that
sooner or later that may be your level.
So stop focusing on money. Focus on your steps to take every day to achieve big
results in the long term. Just focus on your system. Focus on executing your system.
One day at a time. If your system is good, money will follow.
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8. MINDSET
In trading, your mindset is the biggest asset in the world.
Trading vs any other business
Trading is different by any other business.
A 9-5 job is not taken in consideration, because it is a completely different type of
business. It is passive. You work for someone else and you receive your monthly
salary. There is almost no growth. The only growth usually comes after years of
experience, but it is minimal. Your mindset doesn't make a difference.
An entrepreneurial business has more growth and requires a step up of your mindset.
You have more responsibility and risk money to buy accessories, rent proprieties, hire
people, etc.
It definitely has more growth than a 9-5 job. But growth depends primarily on
yourself. You can have better strategies to improve your efficiency, therefore your
profits. But most of the time, you need to invest more money to have better financial
growth. You invest money to hire new people, to hire better people who can improve
your processes.
You invest money to buy new tools, machines, accessories that can improve your
productivity.
You get the point.
You grow, but you need to expand your business with more people / tools or better
people / tools.
Trading is different.
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Growth is potentially unlimited. The power of the compound effect gives you the
opportunity to grow exponentially. Your money grows exponentially. Your skills
grow exponentially.
But it all depends on you. It's just you, yourself and your mind.
The biggest difference with a 9-5 job is the total responsibility you have. Your
mindset is critical to be successful.
You cannot expect to become a successful trader with just one trading system. This is
why many new traders spend a lot of time searching for the perfect trading system.
Perfection obviously doesn't exist. And spending time looking for perfection is almost
useless. Spending time developing skills and consistently evolving your mindset is
the way.
You start by looking for every possible way to be successful, with 0 margin for error,
but after some time you realize it's impossible.
Many traders fear the possibility of making mistakes and ruining things.
Making mistakes is not necessarily a bad thing if you know how to overcome them.
If you continue to make the same mistake, over and over, then obviously that's not a
good thing.
A trading system is not enough to be successful in the long term.
You can have the best trading system in the world, but if you don't have the right
mindset you will still be a loser, because you can't execute.
You can win in the short term, but you will fail in the long term. At the first mistake,
at the first big loss, at the first failure.
The trading system is your tool to win, but your mindset is the knowledge to use your
tool.
For this reason, every novice trader needs to build the foundation before trading with
every possible system as a desperate attempt to make money.
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Day after day, you practice and study past charts, past setups, experimenting and
making mistakes. During this process you form your mindset, realizing that if you
had known a few things before you would have saved a lot of time to practice more
on the right things.
Trading realizations:
• Win 1 month vs Win 10 years
• Consistency vs Perfection
• Long term vs Short term
• You vs You / You vs The market
• Process mindset vs Lottery mindset
• Theory vs Practice
Win 1 month vs Win 10 years
In your first days, you take action by trying to win immediately. You are so afraid of
losing your next trade because it could ruin your day / week / month. Doing so, not
only makes you feel worse emotionally on a daily basis, but it also ruins your
performance. If you are afraid of losing you will be afraid of your next move.
When you realize that trading success is based on years of winning, you will start
trading more effectively. That's why you can't be successful in 3-6-9-12 months.
You can win for 6 months or 1 year, but you can always lose yourself sooner or later.
Many traders have lost their profitability after a winning streak.
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Consistency vs Perfection
This is related to the previous point.
Perfection does not exist. Everyone can lose or make mistakes. The most important
thing is to be consistent in growth.
If you aim for perfection you will fear your next move, your next trade, because if
you want to be perfect you cannot tolerate mistakes. In this way, you will sabotage
yourself and your system, breaking rules, breaking your convinctios and in the end
your identity.
If you aim for consistency you cannot tolerate inaction. The goal is to show up every
day, even repeating the same tasks every day, but consistency is the ultimate goal.
If you are consistent, you don't really care about making mistakes if at the end of the
day you can turn the mistakes you make into fuel to improve your skills and your
experience. Everyone makes mistakes. Only a few can learn from their mistakes to
become better traders.
Long term vs Short term
If you can stay consistent day after day, your benefits will be huge in the long term .
Consistency + Long term = Compound effect
Long term thinking gives you 2 benefits:
1. Focus on executing your plan on a daily basis. If you think long term, you don't
worry about money to be made, expectations to be achieved in the short term,
etc.
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You just focus on your execution. All other things are not your problem,
because you know that by executing your plans and your tasks every day, the
compound effect will start working for you sooner or later.
2. Destroy bad emotions. Thinking long term will make the fear disappear.
What's the point of being afraid of making a mistake, if you know that every
mistake you make in the short term is fuel to make you successful in the long
term?
What's the point of fearing a loss, if you know that one trade means nothing
and every trader can lose the next trade, while what really matters is a larger
sample of trades (100, 1000, 10.0000) to define your success?
Trading is a long game. Focusing on the short term will only burn you sooner or later,
at the first loss, at the first mistake or at the first failure.
Focusing in the long term is the way.
You vs You / You vs The market
Every trader starts this journey thinking they have to beat everyone in the market. So
you start looking for every possible indicator, setup or combination of them that can
give you a trading system similar to the holy grail.
At school they taught you the more you know, the better your grade will be.
Intelligence is the key.
Take this concepts in trading and you will start to add more and more indicators to
your charts. You see some people posting charts with one moving average on Twitter.
You think you can definitely be better than them if you add 5 moving averages and 5
oscillators.
You keep adding and changing indicators over and over, until you understand this is
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not the right way to become a successful trader.
This phase, which can last from a few weeks / months to years, can be summarized as
follows:
You start thinking that whoever has the best system wins, while in the end you realize
that the real winner is whoever has the best control of emotions.
Trading is a psychology game, not an IQ game.
Is it possible that in an arena of millions of traders you can beat every single trader
with only one trading system? Just one trading system? If this were true, many things
would be different. There would be many more millionaires, not to mention the
utopic consequences of "a trading system is enough to win".
The reality is that amateur traders can develop a successful trading system over the
course of their careers, they may even win for a period of time, but they eventually
lose in the long term.
Many traders give up trading without knowing they have a successful trading system
in their hands.
Trading is a psychology game, not an IQ game.
Execution is what separates an amateur trader from a successful trader.
An amateur trader with a successful trading system will still be an amateur trader if
he cannot execute.
Almost all traders when they start trading spend their time looking for shortcuts to
find the holy grail, but almost no one thinks for a moment to the real trading life
changing thing: your emotions.
• How do you manage a loss?
• How do you manage a streak of losses?
• How do you handle a setback?
• How do you handle failures?
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• How do you stay calm when price is going against you?
• How do you stay calm when things don't go accordingly to your plans?
• How do you handle the fear of losing?
• How do you manage your risk?
• How do you handle impatience?
• How do you handle the break of the rules?
These are only some of the questions that every successful trader must answer sooner
or later. Some traders will never be able to answer these questions. Some traders will
try to answer these questions, by fighting against their emotions. Some traders will
find answers. Some traders will not find answers, being destroyed psychologically by
their emotions.
Your trading system is important. Your emotions control is more important.
Everyone starts trading fighting against the market. Only a few win the battle against
themselves.
Process mindset vs Lottery mindset
Everything you do, every action, every hour you put in the work will be part of your
journey.
Trading is a journey where a novice trader develops skills and experience to become
a successful trader. The journey doesn't end once you become a successful trader. It
never ends. A successful trader continues the process of development, improving his
abilities through details and other little things that learn day by day. You will never
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stop learning in the trading markets. Even if you are the best trader in the world.
The sooner you realize that trading is a long process, the sooner you will start
controlling your emotions and your pace of productivity.
It doesn't matter if you make mistakes, if you don't do the right thing every time, etc.
Trading success is not linear. You will have ups and downs, but it doesn't matter as
long as you continue to show up and do the work, improving yourself.
Showing up every day for an extended period of time is the hardest thing to do. In
fact, over 90% of traders give up within 5 years.
Consistency literally kills your competition.
There is a great quote that perfectly explains the concept of the trading process:
“When nothing seems to help, I go and look at a stonecutter hammering away at his
rock, perhaps a hundred times without as much as a crack showing in it. Yet at the
hundred and first blow it will split in two, and I know it was not that last blow that
did it, but all that had gone before.” ― Jacob A. Riis
Many people start trading with the wrong approach. They think it's like playing an
online lottery. You buy a ticket and you could win the jackpot.
So they don't start a solid plan to become a successful trader in the long-term. They
all rely on luck. And this is one of the most stupid thing you can do.
At least in a common lottery, even if the win ratio % is almost 0, you have a huge
reward and a low risk, if you play once.
In trading, with the higher number of trades (events) you need to take, the probability
of earning the same amount of money you would win in a lottery is much lower.
Trading success is the result of many many trades, not just one. Without any edge, no
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risk management and no consistency it is impossible to be successful.
Theory vs Practice
One of the most common mistakes traders do is focusing too much on theory.
Remember, trading success is:
• 1% Theory
• 99% Experience
Spending days, months, years studying books and watching videos is not efficient.
You learn trading through practice.
Learn the basic concepts and some specific setups, systems and all that is needed, but
learning those concepts you need to start practicing.
As you learn how to become a successful trader, the practice should take up 99% of
your time. Many traders don't. They just keep reading new books and watching the
same videos over and over again.
Reading and learning is not bad, of course, but you have to understand that you only
get experience by putting into practice the concepts you read and learn. Don't make
the mistake of falling into the endless loop where many traders get trapped.
Remember: Trading is a psychology game, not an IQ game.
You improve your execution through action and practice.
The best trading system in the world is useless if you can't execute it. You can win in
the short term, but you will eventually lose and fail in the long term.
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Looking for new trading systems, getting new information can be nice, while
practicing, constantly backtesting your system or your setups can be boring, but don't
forget that you learn through practice. Or maybe you learned to swim or to drive a car
just by reading a book?
If you can't learn how to drive only by reading books, then it's logically impossible to
learn how to become a successful trader only by reading books.
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9. BUILD AN IRON MINDSET
Building an iron mindset is like putting together a big puzzle where you have to put
the right pieces in the right place. Each piece of the puzzle is a skill you need to
develop. Each skill is important and is necessary to reach the final stage (result). If
you develop only one skill, this is obviously a good result but you will be incomplete.
The good thing is that these skills are interconnected with each other, so if you
develop one skill, it's easier to develop another skill, and then another, and so on.
The traits of an iron mindset:
• Self-discipline
• Consistency
• Confidence
• Focus
• Resilience
• Patience
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Almost any skill can built through the following formula:
Effort + Feedback + Consistency + Long term = Skill developed
The greater the effort, the less time it takes to develop a skill. This is quite intuitive. If
you work 8 hours a day with the same intensity as another person who works 4 hours
a day, in one year the amount of work produced by yourself is double of the work of
the other person.
Feedback is perhaps the most important part because it allows you to evolve your
work.
If every month, the experience you gain makes you improve the efficiency of your
work by + 25%, a trader who works 4 hours a day becomes more efficient in 6
months than a trader who practices 10 hours a day without improving.
Some traders claim that they worked 10 or more years without finding success. The
problem is this: You can work harder than anyone, but if you keep repeating the same
mistakes over and over without improving, you won't grow. That's why improving
through feedback is a necessity.
The more consistent you are in your efforts, the more likely you are to develop a
skill.
You evolve yourself through repetition and consistency. Not only in trading, but also
in life. If you stop repeating an action over time you will lose momentum and you
will have a harder time to create the right connections in your mind.
1 hour of practice every day for one week is way better than 10 hours of practice in a
day for one week.
The more time you put in the equation to improve your work, yourself and to get
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experience, the more likely you are to develop a skill. If you start trading with the
goal of becoming a successful trader in 1 year your chances of failing and giving up
are very high. If you start trading with the goal of becoming a successful trader in
more years (2 / 3 / 4 / etc.), everything is different and the odds will be in your favor.
Here's why this should be your standard formula in the process of becoming a
successful trader:
1. Practice / Trade
2. Win / Lose
3. Get feedback
4. Learn
5. Repeat
Point #3 and point #5 are the most underrated steps because many traders simply skip
them. The average amateur trader makes a trade. If he wins the trade that's fine. If he
doesn't win the trade, he gets angry not accepting the loss and eventually he changes
his trading system.
You cannot expect to start from 0 and become a successful trader without making
mistakes. It doesn't work like that.
Repetition is a key element in developing any trading skill and becoming a successful
trader. Success is achieved by repeating daily actions, first to build the foundation of
your skill and then to reap the rewards of your work.
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10. SELF-DISCIPLINE
What is self-discipline? It's the ability to force yourself to do things when you should,
even if you do not want to do them.
Self-discipline is the art of mastering your emotions when you have to take actions,
complete tasks, achieve goals, etc.
How to develop self-discipline
The best way to develop self-discipline is to face your emotions with a specific plan.
If you fight against them trying to be the strongest, you will lose and you will likely
have negative consequences such as emotional pain or emotional breakdowns.
If you tame your emotions, instead, the power of them against you will be lower, day
after day .
Trying to master your emotions in 1 day is the fastest way to be destroyed by them.
Trying to master your emotions in 30, 60, 90 + days is the best way to control them.
Just think of common activities like swimming, driving a car, riding, etc. You don't
learn how to swim, drive a car or ride in 1 day, but you build your skills, day after
day. How much consistent you are and how much effort you put in will define the
amount of time it takes to build these skills.
When you keep breaking your trading rules, you unconsciously start to think that you
are a slave of your emotions and you can't do anything about it. This is the stage
where the unconscious mind leads over the conscious mind and you have no control
over what you're doing.
There is nothing more wrong than this. You can master your emotions whenever you
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want. You just need to change some bad patterns in your mind. How difficult the
process of changing these patterns is will depend on how solid these patterns are in
your mind. For example, a trader who kept breaking rules over and over for 3 years
will have more difficulty than a trader who kept breaking rules for 3 months. But no
matter your situation, nothing is impossible in life.
Your mind develops beliefs and identities through habits and actions repeated over
time. You can understand why it is harder to build self-discipline if you constantly
break the rules. But again, nothing to worry about. With time and dedication you can
do anything.
The first thing you need is setting rules.
A person becomes self-disciplined by setting rules and following them. You gain
control over an undisciplined animal by setting rules. Your mind is the same.
In this case, the best thing to do is to create the concept of repetition in your mind.
The concept of repetition already exists in reality (Your mind breaks trading rules
consistently, over and over again), but the goal is to create the concept of repetition
with activities and actions chosen by yourself.
Step:
1. The unconscious mind leads above the conscious mind by doing things you
don't want to do (Breaking rules)
2. The conscious mind leads above the unconscious mind (You create repetition)
3. The unconscious mind leads above the conscious mind by doing things you
want to do (Self-discipline). Everything becomes automatic.
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To build self-discipline, it's necessary:
• A profitable trading system with fixed rules
• A precise risk plan
• Patience during the process
Fixed rules are important. If you don't have clear rules in the beginning, your mind
won't know what to do when opportunities come. This is why trading with a
discretionary system, without self-disciplined and without knowing what you're
doing, is one of the worst mistakes you can do.
To build self-discipline your only goal is to execute your rules over and over again,
no matter what happens.
Disclaimer: It's obvious you need a profitable trading system. Setting random rules of
a nonexistent system would only make things worse. If you don't have a profitable
system yet, go back to the "System Creation" paragraph.
Executing over and over will help you create the repetition pattern in your mind.
To do this you need a solid risk plan to follow.
In the beginning you shouldn't care of the outcome of your trade, because your main
goal in this moment is to build self-discipline.
For this reason you should have a risk plan that allows you to trade without worrying
about money on the line.
Demo trading would be the easiest thing to choose, but in demo trading you can't
train your emotions because you are not using real money.
Live trading is the best thing to do to train your emotions. No doubt about it.
The best thing to do is to risk less than the normal amount of money. So, for example,
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if you normally risk 2% per trade, you could reduce your risk to 0.4 / 0.5% per trade.
Or if it is better for you you could open another account with a small amount of
money that you "can afford to lose" and trade with your usual risk %.
It doesn't matter how you do it, it depends on you. The important thing is to find a
suitable way for you to trade your system at least 50-100 times without the thought of
money in your mind.
Remember, the goal here is to build self-discipline.
Money comes and goes. Skills stay with you forever.
Patience during this process is perhaps even more important. If you trade your system
for only 3 or 4 times, you will not see results. The more you trade and the more you
stick to your rules, the more your self-discipline will be developed.
Among all the side effects benefits, you may also gain insight into the actual trading
results. You see both wins and losses. Trading systems don't have 100% wins.
Trading systems don't have 100% losses. So you might create the habit of enduring
losses in the very short term.
Don't underestimate this, as many traders change systems or, worse, give up after a
streak of losses.
Trade after trade you build self-discipline, until you reach a point that you don't have
to worry about following your rules because it becomes automatic.
In fact, if you think about it, when you have a profitable trading system and a good
risk plan, what can stop you?
Obviously you need self-confidence when you trade with a higher risk % and more
money on the table, but that's another chapter.
Here the goal is to follow your trading rules.
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Trading is 20% execution and 80% waiting, so if you want to grow faster, you won't
have much time to train your discipline during trading hours. Many traders don't even
use trading hours in the right way to train their skills. They just trade without any
system and long-term plan. But traders who use their time in the most efficient way
may want to reduce time needed to increase their discipline.
This is why is useful to train your discipline outside of trading. You have many of
opportunities to do this.
Remember, your goal is to create repetition in your mind with activities chosen by
yourself, not your bad emotions.
A discipline trader is usually a disciplined person.
The concept is the same of you following your trading rules over and over again. You
have to start some activities until you create repetition in your mind until you reach a
point where you don't have to remember yourself the actions to do, because now
everything is automatic for you. This is how you create discipline in anything.
1. Indiscipline
2. Set rules / routines
3. Repeat until it becomes automatic
4. Discipline
You can choose any activity you want, the important thing is to keep doing the same
activity every day until it becomes automatic.
If you don't know which activity you can choose, here some examples of useful
activities that can improve your life on a daily basis:
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• Reading
• Writing
• Running/Lifting weights
• Cold showers
• Eating healthy
It may seem pointless to you, but trust me, nothing will build your self-discipline like
taking consistent actions that you don't usually do.
In fact, if it seems easy to do these activities, you will change your mind after 30-5070 days.
Everyone is able to read 100 pages in a day, running 2 hours in a day, etc.
Very few people are able to do these activities consistently for more than 90 days.
Everything seems easy, until your mind starts telling you: "No buddy, today I'm
tired", "No buddy, I just did it yesterday", "No buddy, today I'm too busy", etc.
That's why it's very important to start small in order to be consistent over the long
term.
So you don't have to run 10 km a day. 2 km are enough, if you are consistent.
You don't have to read 100 pages in a day. 10 are enough, if you are consistent.
Know your potential and what you can do and act accordingly.
This is the stage where the conscious mind will have to lead over the unconscious
mind.
Moving on, after day 20, 30, 40, etc. you will see that you will have more control
over your emotions. In fact, as the days go by, you will realize that everything in your
mind becomes automatic, with the result that you no longer need to tell your mind
what to do.
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Disclaimer:
Please, use the logic and don't act in a stupid way. Don't think that the more you do,
the easier will be. It's quite the contrary. So don't start running a marathon every day,
taking a 1 hour cold shower every day, etc. Know what you can do and act
accordingly.
You are responsible for your actions.
The next step is to consolidate the level of your self-discipline.
You will reach a point where everything starts to become normal. This point depends
on the people and their level of self-control. Someone may need 30 days, someone 90
days, someone else 180 days, etc.
When you reach this point you essentially have 2 choices:
1. Consolidate your self-discipline level. Every action is now part of your identity
and you don't need to remember to do it, but it's mostly automatic (obviously
the more you repeat an action, the more automatic it becomes). So, you can be
satisfied with your level reached and focusing on other things. Of course you
need to continue to repeat your actions over and over to maintain the level.
2. Increase your self-discipline level. You know that the more you practice an
action, the more you master that action. Here it's the same thing. The higher the
intensity of the action the higher will be your self-discipline level.
So add a little more into your activities. If you have been running 2 km a day
so far, start running 3 km a day. If you have been reading 10 pages a day till
now, start reading 15 pages a day. And so on until you are satisfied with your
results.
Great achievers don't reach massive results if not through consistent actions,
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routines, plans and a gradual growth to reach the highest possible levels.
The focus in increasing your level is always consistency. If you are not
consistent with your actions, you go back instead of moving forward.
Remember, everything depends on person to person. Every person is different, with
different desires, different abilities, different goals. Just focus on your journey and
forget everything else.
At this stage you don't need to use your energy to control your emotions because
everything becomes automatic. Your mind just executes the right actions to do like an
automatic pilot. You can following your rules without any problem and you will also
have more mental energy to focus on other things (Without self-discipline you have
to force yourself to follow your rules).
Your mind and your emotions are under your control. Your unconscious mind
deliberately acts to take your chosen actions.
This is self-discipline outside trading.
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11. CONSISTENCY
Consistency is the quality of always behaving or performing in a similar way, or of
always happening in a similar way.
Self-discipline is nothing without consistency.
You create self-discipline through repetition. Daily repetition is consistency. In fact, if
you think bigger, consistency is the mother of all the skills you build or develop. To
acquire any skill it is necessary to practice. Then it all depends on the level you want
to reach. People are different. Some aim to a standard level, some aim to an advanced
level, some aim to an elite level, etc.. It all comes down to how hard you practice and
how consistent you are.
Just think about at the best athletes, the best businessmen, the best traders. They've all
worked hard consistently for years, doing the same activities or the same training
almost every day.
The repetition pattern has a great influence on your mind. You cannot imagine how
many activities that you regularly do are the result of many consistent actions
repeated in the past.
How to develop consistency
• Vision
• Long term thinking
• Patience
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Vision
In trading, you need a purpose, a goal. Not a common goal to reach in a day or in a
month, but a goal for your journey, for your life.
For example, athletes start their career with huge goals, like winning a medal or gold
medal at the Olympics, becoming a new world record holder, etc.
Do they expect to reach these goals in a couple of months? Of course they don't. They
don't think in days. They think in years. Then they just show up. They train hard and
they don't lose motivation during this process. Why? Because they are driven by their
purpose.
At the same time, you should have a purpose for your trading career.
Why do you want to be a successful trader? What will make you show up every day
to do the work no matter what? Be specific. Saying things like "I wanna be a
millionaire", "I wanna be a billionaire" is cool, but will it push yourself hard enough?
If the answer is yes, then keep going. But remember that money is always a tool
useful to you to do other things, like buying proprieties, things, traveling, meeting
new people, etc. You usually need deeper purposes to keep going.
Many traders have focused so much on making money, losing all their long-term
motivation, with the consequence of losing productivity, time and money.
Think about it. Why do you want to become a successful trader? What is the greatest
result you want to achieve through trading? Take this goal and set a big amount of
time to reach it (10+ years).
Remember, every person is different. The right purpose for you may be not the right
purpose for someone else. So focus on yourself.
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Long term thinking
Many traders fail not because they don't have a purpose, but because they don't have
a long term vision.
Just think about the typical trader who starts trading because he thinks it's a get-richquick scheme. Thus, the phrase "I wanna become a millionaire in 6 months" will
quickly turn in something like "Trading is a scam".
Do you really believe that very ambitious goals can be achieved in a short amount of
time? Using the past example, do you really think that an athlete will get a gold
medal or break a new world record in a short amount of time?
Sure, there are many examples of 20-25 years old athletes who have done this, but
they are rare and more importantly, they also have years and years of training and
hard work.
It's quite difficult in the beginning to create the habit of thinking long term, especially
if you've always thought the opposite way.
If you find difficulties at this stage, what can really help you to think long-term is
your purpose and self-discipline.
In difficult times every person has two choices: to give up or to keep going.
Most people who refuse to give up are driven by their purposes, their goals. They
know they can't give up because achieving their goals is too important. Your life
depends on it. It's like a mission. Then, of course, huge self-belief in their abilities
and in themselves is also a big contributor.
Self-discipline will help you because a disciplined person knows that he has to
continue to do the work no matter what.
Patience
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Waiting is probably the hardest thing to do in trading. You want results, you want
money, you want success, but seeing days go by without any is hurting you day after
day.
It all depends on your state of mind, your logic and how you see the world.
The best businessmen, the best athletes, but also all the people who can achieve a
great level of skills, without being a top 1% in the world, dedicate years of training
and experience to be successful in their field.
So why should a trader become a successful trader in just 3-4 months? Don't get me
wrong, 3-4 months of focused hard work could really produce massive benefits,
generating ideas, new patterns in your mind, some experience, early developments of
new skills, etc. But don't you think you need more than that to become a top 10% (or
5% or 1%) trader?
Patience is perhaps the most critical skill during the process of becoming a successful
trader.
In the following chapters you can see more details about it.
Why consistency is more important than perfection?
Consistency is probably the most important trading skill. You can be disciplined,
confident, patient or whatever you want, but if you're not consistent in what you do,
your results will be negative in the long-term.
There's a reason if trading success is measured by a traders' consistency. Winning for
1 year is cool. But winning for 10 years is certainly another feat.
A + 50% return on your investment of in one year is great, but achieving this return
on your investment consistently every year for 10 years is completely another story.
That's why you need to be careful on people on the internet saying "Become a
successful trader in 6 months like many others did", because it is a complete bullshit.
Even if we forget the amount of time required for a common person to learn how to
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execute a trading system, to mastering your emotions, etc., even if you start making +
20% on your account every month for 6 months, then what? Great results sure, but
trading success is certainly not measured in 6 months.
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12. CONFIDENCE
Confidence is the quality of being certain of your abilities or of having trust in
people, plans or the future.
Confidence is a very important skill that every trader should have because it brings:
• Better performance
• Better emotions control
• Better resilience in difficult times
If you want to become a successful trader you essentially have to increase:
• Confidence in your trading system
• Confidence in yourself and in your skills
If you don't believe in your trading system, your execution will never be good enough
to become a successful trader.
If you don't believe in yourself and in your skills, you will have a lot of problems in
managing your emotions and in difficult times.
Lack of confidence is one of the main reasons for trader failures.
Many traders may have a successful trading system, but as soon as they encounter a
streak of 3-4-5 losses, they get scared and they change the system. They add an
indicator, they remove a good setup, they add another indicator, they remove that
indicator, again and again until the system is completely changed.
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Confidence truly has one of the most brightest sides of all trading skills.
With enough confidence you can break all your limits and reach peaks that average
people don't believe possible. When you act without fear your mind will act without
limits (fear is usually a signal to your mind to indicate danger, so limits its
capabilities).
Think about it. What would you do, what would you achieve if you weren't afraid?
However, it can't be too good.
Confidence also carries some disadvantages. Disadvantages that you can obviously
keep under control. You have to.
This is overconfidence.
When you think you are unstoppable, you think you know everything, you think
nothing can stop you, you may start to act in a dangerous way.
If you start to think that you cannot be wrong, you will start to increase risk because
if you are always right, you can't have losses and therefore why can't you risk 20%
per trade instead of the common 2%?
That's where the market will kick your ass very hard. So, what happens next?
Confidence doesn't go away. It actually increases a lot more. The trader wants to
recover the loss quickly. It starts a sort of revenge trading, with the feeling "I can do
this"
that
increases
more
and
more,
until
it
becomes
a
mission.
The trader can also recover the loss eventually, but in this case he will only add more
confidence to the already infallible level of confidence, entering a spiral where the
greater the recovered loss and the greater the feeling of invincibility. The greater the
feeling of invincibility, the greater the risk. 30%, 40% per trade and so on as long as a
catastrophic loss leads to one of two possible future scenarios:
1. The trader's emotions are hurt so bad with the inevitable consequence of
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creating a big emotional wound. Confidence fades immediately. Fear comes in
and the trader is hurt so badly that he can no longer execute. This feeling can
last days or weeks, until the trader eventually gives up, being hurt so badly.
2. After a short or long period, the trader finds the internal strength to overcome
this scenario. He decides to analyze the mistakes, to understand how to deal
with his emotions, etc. The trader “recreates himself” by learning the lesson.
He becomes stronger and he eventually becomes a successful trader in the
future.
Overconfidence is a huge beast.
Don't try to be bigger than the market because it will always be ready to humiliate
you. If this happens to you, stay calm and try to improve immediately by learning the
lesson. Many successful traders were humiliated by the market in the early stages.
They found a way to master their emotions and not get overwhelmed by them. In
trading, the best traders are not necessarily the smartest people in the world. The best
traders are the people who can handle their emotions in the best way.
How to increase confidence in your trading system
Confidence in your trading system is the most important skill (with self-discipline)
when you have to execute a trade.
If you hesitate, if you are afraid to act, the opportunity slips and goes away. If you
then break your rules, taking a worse trade than the one you would have taken by
following your rules, your results are worse.
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Confidence in your system essentially depends on 2 variables:
1. Amount of risk
2. Knowledge of your trading system
Amount of risk
How much you risk per trade clearly affects your confidence level. That's why demo
trading is much easier than live trading. In fact, in demo trading you do not risk
money. Think about it. If you have more money at stake, your mind will be obviously
more affected. People usually don't like losing. People absolutely don't like losing
money.
Let's take an example. You have a $ 10,000 trading account. If you took a trade
risking 10% ($ 1,000), you would be more concerned about the outcome of the trade
than with a trade with a 1% risk ($ 100). If you lost the trade you would lose 10% of
your trading account, instead of 1%.
If you reduce your risk %, your mind will be at the same time affected. In fact,
continuing with the example, you would be almost unbothered on the outcome of a
trade if you risked only 0.1% ($ 10).
A common mistake of new traders is taking a much higher risk than normal.
With higher risk, they are more open to breaking their trading rules with the
inevitable consequence of losing money and having a bad performance.
If you are able to find a trading edge, the next big step is to create the right level of
confidence to execute your trading edge over time.
Remember, finding a trading edge requires time and dedication. If you can handle
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this phase, you have already done a great job, but you're still at the beginning of your
journey.
So, you can't start this process of confidence building until you don't have a profitable
trading edge. This is important. You cannot build confidence in a losing system.
You can surely take some time to test, train and trade your system on a demo account,
but sooner or later you will have to do the big step to start trading live.
When you trade on a demo account you don't train your emotions. Of course you can
focus on your performance, but when real money aren't involved in the equation,
trading is a different business. Your mind thinks different. You execute different.
Starting at 0 on a live trading account, you need to build your confidence in your
system, step by step.
Your goal at this stage is to create a demo account-like environment where your
emotions are unaffected by the money at stake and you are "free" to run your system
without fear of losing money.
At this stage you have to set your risk as low as possible. So, if you have a $ 10.000
account and you plan to trade at 2% risk per trade, set your normal risk to 0.1% (even
less if you are not comfortable with 0.1%). The important thing here is to avoid a
pressure high enough to ruin your execution. Don't forget that a little pressure is
needed to grow, otherwise you will always trade a demo account forever. The amount
of risk per trade you decide to take depends on you. You might think starting from
0.1%, someone else might think starting from 0.5%, etc.
If you prefer to use your normal risk %, you could also open another small account
with money you can afford to lose, but the first option is certainly more effective.
If your system is profitable and your execution is good, you will start to make some
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money. Your mind will start to see that your trading system really works, so it will
start to create good connections with your system. Many times practicing is not
enough. Your mind need to experience things to understand what it can really
accomplish.
Patience is critical at this stage. Do not rush. Just feel the good vibe and continue to
execute your system.
When you feel like you are entering your comfort zone again, start to increase your
risk % a little bit.
If you started with 0.1% of risk per trade, increase your risk to 0.2%. If you started
with 0.4%, increase to 0.6%, and so on.
Again, how much you increase your risk level depends on you. You have to train and
to work with your emotions. You need to have a pressure high enough to grow, but
not high enough to be afraid of executing your system.
When you increase your risk % a little bit, then repeat what you did in the beginning
(trading your system with lower risk).
Then repeat the various steps over and over until you reach the % of risk you want to
take per trade.
This risk % adjustment process allows you to work with your emotions step by step.
Many amateur traders start trading with the common 2% risk per trade as soon as
they think they have a profitable system (without even testing it). You cannot expect
to immediately master your emotions by moving from demo trading to live trading.
It's like learning to run without learning how to walk.
This phase (risk % adjustment process) may last 15 days, 40 days, 2 months, etc. It
totally depends on you and on your confidence level.
Never forget that this process works also the way around.
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If you have any doubts, if you feel you are focusing too much on money, if you need
to add items on your system or anything else, just reduce your risk instead of
increasing it.
To recap:
1. Demo trading (if you need)
2. Live trading with low risk until you gain confidence
3. Increase risk % a little bit
4. Live trading with adjusted risk until you gain confidence
5. Repeat steps 3. and 4. until you reach the final risk %
The speed and the effectiveness of this stage is entirely up to you and how well you
know your trading system.
Knowledge of your trading system
How well you know your trading system determines your level of execution.
It's not about experience. You just need to create the right connections in your mind.
You can't pretend to be able to know a working system before putting it into practice.
For example, a trader who traded his system consistently in the last two years is
definitely more confident than a trader who just created his system.
Your goals:
• Know anything you can about your trading system
• Practice with the information you have
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• Get in sync with your trading system
The first thing to do is to acquire information about your system, taking into account
all the details of your trading plan and strategy.
Your trading plan should have specific rules on how to trade your system. For
example, the % of risk per trade, stop losses, take profits, trailing stops and all the
things you need to know to follow your trading strategy.
For these information you should need other data to create better targets with the goal
of increasing the efficiency of your entries and exits.
This is why you should check how your system has worked in the past.
You are free to look for any kind of data you want (there are a lot of different data
available), but the most important are:
1. Win Ratio %
2. Risk Reward Ratio
There are many programs that can do the work for you in some minutes, but if you
want to do it yourself by doing a sort of backtesting you can do it. In the meantime,
you use the time to train your eye. You just need to go back into the past on your
charts and see how the various setups worked out. In this case, remember to use the
targets of your trading plan so you can see if you need to change anything.
Generally, you decide the risk reward ratio you want to use and then you calculate
your win ratio. The more you decrease your risk reward ratio the more your win ratio
will decrease.
In a trading system, if you have a win ratio of 50% and a risk reward ratio of 1:1:
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• A risk reward ratio of 1:2 will have a lower win ratio than 50%
• A risk reward ratio of 2:1 will have a higher win ratio than 50%
The win ratio and the risk reward ratio are are interconnected and you decide how to
manage them. This is a very important step that every trader should take before
starting trading, but not all of them do.
Once you define all these details it's time to start practicing, acquiring confidence and
some experience and then trade live.
Backtesting is the first thing to do. The advantage is that you can practice when you
want. Studying past charts gives you the opportunity to train at any time (you don't
have to wait for new bars to appear in the live market). Hence, you can also practice
on weekends and after business hours.
The big downside is that bars are already in your charts and you don't have a properly
"simulated live experience".
But what you need now is to make new connections in your mind, learning how your
system works, adjusting stop loss and take profit targets and other things to maximize
the efficiency of your system. The more your mind sees your system working out in
the past, the more its confidence in the trading system will increase. Your mind will
start thinking "I can do it".
The second step is to forward test your system. Obviously it's not like live trading,
but it's better than backtesting because in theory you can practice with new bars. In
fact you can easily scroll back your charts and move forward bar by bar. The
advantage is that you can do this as many times as you want. Your hours of practice
are not restricted to market hours.
These steps are important for building your confidence. Real trading is another thing,
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but you need to build the foundation before starting trading live.
Getting in sync with your trading system is a must. You can't pretend to be a
successful trader if you don't know exactly how to use your trading system. In fact,
your trading system is the only tool you have to win in an arena full of traders like
you.
When you start trading live, you should remember how confidence changes trade
after trade. How much it will change on every trade depends solely on your skills
level. A very experienced trader has small changes on a single trade, while a novice
trader can have huge changes on a single trade.
• Every win gives you more confidence
• Every loss gives you less confidence
With every win, your mind sees that the system is profitable and the feeling "I can do
it" becomes stronger. By taking this scenario to the extreme you will obtain an
overconfidence state where you think you are invincible. This is the case of a novice
trader who has a streak of 10/15 wins in a row and start to risk more because he
thinks "I can't lose", resulting in big losses sooner or later.
With every loss your confidence level decreases. In fact, if for every win your mind
thinks "I can do this", for every loss your mind begins to doubt your system. The
human mind has the habit of thinking short term (due to survival instincts), so losing
2,3 or 4 trades in a row creates doubts about the effectiveness of your trading system.
This is the case of the novice trader who switches the trading system after a couple of
losses, making the mistake of abandoning a winning system.
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It's your job to balance these feelings.
You should always keep the same risk %. You will never know if your next trade is
going to be a winner or a loser. Even the best trading system in the world can lose the
next trade. Hence, there is no need to take huge risks in one single trade.
Losses and streak of losses can be tough, especially in the beginning, but if you
prepare yourself with plans, tests and hours of practice, there is no need to worry
about the outcome of a couple of trades. Being able to think long term is always
helpful here. If you can't do this, just set a time period (30, 60, 90 days, etc.) to trade
your system and stick with it until the end.
The more experience you get, the less these scenarios will affect your mind.
So keep going.
How to increase confidence in yourself
• Know your strengths and weaknesses
• Set small goals
• Scale up your goals
• Don't compare yourself to others
Know your strength and weaknesses
Trading is a business that gives you many opportunities to create your own path.
There are a huge amount of tools available for you to succeed. Just think about the
quantity of indicators, setups, market structures, tools, etc. that you can use to create a
winning system.
One certain thing about all of this is that you can't know everything. It's impossible.
So what's the point of worrying about some tools or indicators you don't know how to
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use when you have tested and verified your system?
Focus 100% on your strengths (your trading system) and forget everything else.
A great benefit of trading is the fact that you can decide lots of variables. You choose
when and where you take and close a trade and more importantly, you decide how
much risk you take for every trade. That's a lot of stuff that depends only on you.
All of this to make you understand that in a business where there are thousands of
ways to become a successful trader you can choose any path you want to do it.
Set small goals
Having a great goal to achieve in 10 years is a good tool that pushes you every day to
be consistent and productive, but day after day, without seeing results, the motivation
can disappear with the inevitable consequence of less confidence in yourself and of a
worse overall performance.
To avoid this, you need to create a plan to build confidence every day. This is why
setting smaller goals to achieve on a daily / weekly basis is very important on your
life.
People just create different goals based on their characteristics and their desires, but
you are free to create daily / weekly / monthly / quarterly / yearly goals as you like.
In this way you have two main advantages:
1. You increase your productivity and focus in the short term
2. You increase your confidence in yourself
When you reach a goal, your mind generally increases the level of confidence,
because when you achieve a goal, connections are made in your mind. Firstly, your
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mind realizes that achieving that goal it's possible. Second, that goal becomes
"easier" for yourself because you have already achieved it and you create the belief
that you can do it again.
Remember, to have a very efficient plan you should set your smaller goals
accordingly to your "final" goal. In this way, the smaller goals create a sort of path for
you to follow on a daily basis. In fact, if achieving your daily goal every day brings
you closer to your weekly goal, then achieving your weekly goal, week after week,
will bring you closer to your monthly goal and so on.
A simple example of trading goals could be:
• Daily goals: Backtest 3 times your trading system, check your plan before
taking trades
• Weekly goals: +1% in your trading account
• Monthly goals: Analyze all your monthly trades
• Quarterly goals: +10% in your trading account, report of your system progress
• Yearly goals: +50% in your trading account
This is just one example, but you get it.
The best thing about this goal planning is the tremendous productivity, motivation
and confidence that comes with it as soon as you start automating your daily goals.
Every day you are motivated to achieve your daily goals. The compound effect of
your actions that comes from daily efforts will get you to the weekly / monthly goals
easier.
As soon as you automatize your efforts on a daily basis to achieve your short term
goals, you will also start to develop self-discipline in repeating your tasks over and
over. For this reason, a disciplined trader will find these tasks easier to follow.
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From there, it's just a matter of time and long term thinking.
Scale up your goals
Trading is a business where you improve every day and you can always improve
more, regardless your actual level. Your potential is unlimited.
When you achieve a good level of trading and a high enough confidence that can help
you make steps forward, you can gradually increase your goals.
A good trader does not aim to go from 0 to 100 without first going from 0 to 10.
Obviously, going from 0 to 10 teaches you many things and gives you experience
among the skills you started to build, so it's easy to understand that going from 10 to
20 can take you less time than going from 0 to 10, if you gradually scale up your
goals. The first steps are always the hardest, but once you start, you learn along the
way. For this reason, a trader aiming to go from 0 to 100 will take less time to go
from 90 to 100 than to go from 0 to 10.
Remember to be careful of your risk and to set many small goals to achieve the big
goal. If you are not careful enough you will risk to go to 0 faster.
Don't compare yourself to others
Trading is a journey. Every trading path is different because every trader is different.
Every trader starts from 0 on day 1. How well traders develop themselves depends
exclusively on them. The development of every trader depends on several variables
that are constantly changing.
The amount of hard work depends on the trader.
The consistency of daily efforts depend on the trader.
The skills developed and experience depend on hard work and consistency.
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The results of the traders depend on skills developed and experience.
You can see that every trader determines their own destiny by the actions they take on
a daily basis.
Every day is different for every trader.
Every day changes so much due to the amount of work, consistency, skills,
experience, etc. So why do you think it's so important for you to compare your
journey on day 100 with someone else journey at day 3500?
Sure, you can use someone else journey as an inspiration, knowing that if you work
hard day by day you can reach that level, but comparing your results saying things
like "I will never make it", "I'm a failure" and other complaints is the worst thing you
can do.
Also, if every journey is different, then every trader will find success at a different
time in their journey.
Someone can become a successful trader in 2 years, someone in 4 years, someone in
6 years, and so on...
The best thing you can do is focus 100% on your journey and on your daily efforts
that you consistently produce. As long as you see yourself improving, there is nothing
you should worry about. If you see you are not improving, then maybe you need to
start questioning your plans, your daily efforts, etc. Until then, keep going.
Success is never guaranteed in trading. This is why resilience is very important in
your trading journey. You will need it on difficult days when everything seems
against you and you start to doubting yourself.
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13. FOCUS
Focus is the careful attention that is given to something such as a task, or the ability
to give your full attention to something.
So overestimated, this skill allows you to boost your productivity and the
effectiveness of your actions like no other skill. The common example is the
difference between a trader who practices for 4 hours a day, getting distracted every
minute by something and a trader who practices for 4 hours a day without being
distracted. The latter invests 4 hours a day of focused hard work, creating much more
than the former who invests 4 hours of inefficient work. After one day the difference
between the 2 trader is minimal, but after one week, one month, one year the
difference is much larger.
Think it in this way: If the 4 hours of the former trader, in terms of productivity, are
like 2 hours than the latter, then the former has to work 2 whole years to reach the
results of the latter trader after one year of work.
These numbers are only an hypothetical example to make you understand how much
your level of focus can make the difference on your daily activities. Obviously, many
other variables enter in the equation of productivity.
Benefits:
• Better execution
• Better decisions
• More productivity
• Less noise in your mind
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If you can focus on your activities, execution will certainly get better. Many traders
make mistakes taking trades or executing their systems because they are distracted or
their minds are not entirely focused on the task they have to accomplish, so they miss
some rule, they don't have the right timing, etc. Being focused is very important
because most of the time your decisions have to be fast and effective, so one tiny
mistake can ruin your plan and your execution for a specific trade.
Your decisions would consequently be better. If you are focused on executing your
plan and nothing obstacles you, executing your plan may sound the easiest task in the
world. In this case, the results would solely depend on the effectiveness of your plan.
Better decisions bring better productivity. Better productivity brings more clarity,
more goals oriented, more vision.
Execution, decisions, productivity, clearness of your mind... Everything leads to your
ability to be in the zone. A trader in the zone is highly productive, completely
connected with his mind, being able to do and to see things that he can't in a normal
state. Focus is very important to reach this flow when you feel like a superhuman, but
also other skills have to be on point. For this reason, the more experienced the trader
is and the more chances the trader has to be in this rare state.
It's possible to be in the zone even if you are a novice trader. Obviously this is likely
to happen less times if you are a novice trader. An experienced trader would
experience this state more frequently.
How to increase your focus
• Make clear plans
• Change environment
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• Focus in the present moment
• Don't forget your process
Making clear plans is always the best way to increase your focus. A common problem
for many traders is not knowing what to do on a daily basis, so they go from task to
task every 5 minutes without focusing 100% on what they are doing in the present
moment because they are already thinking on the next task. In fact, Multitasking is a
killer of your productivity. Instead of focusing 100% on one task for 20 minutes, you
are focused 20% on 3 different tasks for 20 minutes, ending up with less work done at
the end of the day. The common example is the trader who studies past charts, but
after 5 minutes he takes a random trades without studying the market and without
following his system. Then maybe he wastes all his time looking to a 1-minute chart
for all day, studying a couple of charts here and there sporadically.
A clear plan gives you two benefits:
1. Direction to follow during the day. Many times the human mind finds many
distractions along the way, so we lose productivity. You can use blocks of 1
hour or 30 minutes to fill with tasks you have to do. Do you know that highly
productive people plan every hour of their days? It's said that Elon Musk plans
his days with blocks of 5 minutes. Planning your routines gives you direction
to follow in the day, and to a broader level, gives you direction to follow in the
week and in the month.
2. Focus boost. If you have a plan to follow for every hour of the day, it's like
having an autopilot mode in your mind, but with the activities you choose to
do. Your mind will not go from task to task every 2 minutes anymore, boosting
your focus. It can be a little be uncomfortable in the beginning, but eventually
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you will create the habit.
Plan like a genius, execute like a robot.
When it comes to planning, everything depends on you. A good trader is able to
execute his plan very well. A great trader is able to plan very well and to execute his
plan very well.
Your plans depend on your abilities, your characteristics as a person and as a trader. If
you are a day trader you will maybe have less time during the day to do other tasks.
So you need to adjust everything based on your needs.
Your environment determines the level of your focus. The level of self-discipline
surely affects your focus, but the things around you has important consequences on
your execution. Do you think that you will take better trades if you are constantly
looking to your phone, social medias, games, etc.? When you trade you should be
100% focus on your system, your rules and your plan. Don't listen to other people's
opinions, don't take a trade without knowing what you are doing. It sounds stupid but
it's not. Many traders mistakes come at the start because they take trades by not
following rules due to fear of missing out, some "guru" opinion, etc.
Remember that you have to control what you can control, your system, your rules,
your plan, your decisions, your risk. There are many things you can't control in
trading, if you don't control what you can control, then your chances of success drop
heavily.
To maximize productivity focus 100% on the present moment. If you have to take a
trade, don't lose your faith in your system because you lost the last trade. Don't bother
on what can happen in the future. As long as you have a proven trading system that
you can fully trust, your job is to spot setups, follow your rules and execute. Your
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edge will eventually play out in the long term. Evaluations can be made periodically
(weekly or monthly or when you decide) to understand what is working and what
isn't. But when you trade, your judgment shouldn't be affect by the outcome of the
last trade.
If you use a timer for other tasks like studying charts, backtesting your system,
reviewing past trades and more, then focus 100% on that task and forget everything
else. Let's say you use blocks of 30 minutes. For 30 minutes focus only on
completing the task. Don't switch to other things over and over again, not
accomplishing anything.
While you focus on the present moment for trades, blocks, etc. you shouldn't forget
that everything you do on a daily basis is part of your process. Don't forget that every
day is a little step you make to reach your long-term goals.
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14. RESILIENCE
Resilience is the ability to be happy, successful, etc. again after something difficult or
bad happened.
Resilient traders have an internal force that drives them through difficult times. All
the successful traders in the world need to be resilient, because you don't really know
what's going to happen in the future, and crisis and though times are always ready to
attack you.
You build resilience by going though bad times without losing sight on your ultimate
goal. If you can survive to the greatest failure, without saying "I can't", but saying "I
will become stronger from this", you will develop resilience.
Resilience is formed by:
• Persistence
• Tenacity
• Ability to overcome obstacles
A persistent trader is a trader who persists in what he's doing, no matter what.
A tenacious trader is a trader who continues with determination what he's doing.
A trader who can overcome obstacles turns any difficult scenario into an opportunity
to become a better trader.
By acquiring all these skills, a trader becomes resilient.
Resilient traders absorb the toughest failures, return to their normal state and
overcome the failures with positivity and a strong attitude.
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How to develop resilience
1. Know who you want to be (It's important to see your future self to have a solid
image of your end goal)
2. Meditation/affirmation (Calm your mind to stay calm in tough moments and
understand what is happening)
3. Cut off negativity (Power to return to the normal state with your end goal in
mind)
Know who you want to be.
It's critical to stay focused on who you want to be in 5, 10 years, etc. This is your
drive, what produces your motivation, what keeps you going day after day because
you know you have a purpose to achieve.
You have to remember that with enough hard work and a long enough period of time
you can do anything.
Meditation
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This is quite subjective from person to person. Someone can have benefits after a
couple of days, someone can have benefits after weeks. The most important thing in
doing this is to be consistent. You may not see results immediately because your mind
becomes calmer day after day. For example, you start to see results on day 30, but in
reality you started to change and improve since your day 1. Your conscious mind
doesn't realize that improvements begins from your day 1.
There are many types of meditations, like you probably already know.
The meditation I have found most useful is shutting yourself completely, listening to
noises outside yourself until you remain alone with your own thoughts. In this phase
you have the power to enter in your thoughts and the power to change what you are
thinking. Do not do it. The goal is seeing your thoughts and emotions go by and don't
be affected by them. You must be like a stranger watching these thoughts go by like
an ordinary train passing through a station.
Remember that the goal is to be in control of your emotions. When you are in the
middle of a trade, a cascade of emotions may hit you hard sooner or later until you
make a mistake and you ruin your trade. Hence, deleting your emotions is very
difficult and it takes a lot of time to change patterns due to roots also in your
childhood as well. What you can do then is control them. Be in control and stay put
below the cascade and don't let the current take you away.
Affirmation/Visualization
"You become what you think about all day long." - Ralph Waldo Emerson
There are many misconceptions in these practices. People will sell you "the holy
grail" by telling you that you have to repeat this and that for 15, 30 days, etc. and you
will become successful. This is not true.
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Any kind of affirmation or visualization is pretty useless if you don't take action.
When you affirm sentences, mantras or you visualize yourself in the future, you try to
synchronize your actions with your mind. Your mind is a powerful machine that can
trigger you to do things you don't think are possible.
Just think of the example of an actor in his movie location in the wood, where he
suddenly sees a bear and he starts running away because the fear in his mind has
taken over. In reality, the bear was just a costume of the movie set and the whole
scenario was just a projection of what his mind believed was true.
At the same time you can trigger your mind to act as if you are more successful, more
skillful and more experienced than yourself, with the inevitable benefits of higher
productivity, better results and therefore greater growth.
In this case just remember, after the affirmation/visualization you have to act. If you
visualize yourself successful but after that you go to sleep for the whole day,
everything is practically useless.
Cut off the negativity
Negativity is involved in the previous chapter.
Trying to remove the negativity from your mind is one of the benefits of an
affirmation / visualization practice. It is well known that negativity is one of the first
reason why traders fail, but it is generally one of the first reason why people fail in
life. You probably already know the effects of negativity on your mind, so we will not
talk about this anymore here, but it's important to understand where the sources of
negativity are so that you can avoid them and not get dragged down.
• People who constantly complain about everything
• Past failures and past mistakes
• People who criticize you saying "you're wasting time", "you're lucky", etc.
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• Arguing with other people
• Thinking small
Negativity has the opposite effect of an affirmation / visualization practice.
You may not be aware of this, but negativity affects your decisions, hence your
results, day in day out. You lose confidence in your abilities and in yourself, your
productivity decreases, your results are not what you expect, so you lose more
confidence and the pattern starts over, until you eventually quit your activities.
Removing negativity is critical in trading because you have to deal with a lot of
setbacks and fights against your emotions. Negativity is like an handicap that limits
your potential. Even the best successful traders have setbacks once in a while, so it's
not hard to understand the amount of pressure you have to go through on your
journey to become a successful trader.
The best ways to remove negativity:
• Have a purpose
• Develop self-discipline
If you have a purpose that can push you good enough, you won't have any problem in
removing negativity. A purpose must be ambitious enough to "force" you to show up
every day by improving your skills, but not too ambitious to make you lose all the
motivation as days go by.
Developing self-discipline is easily the best way to remove all your negativity and
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insecurities. When you become a machine capable of turning any negative scenario
into an opportunity to improve yourself, very few things can stop you from achieving
amazing results. You will not be bother by other people's opinions, your silly
emotions, your past mistakes and failures.
In the end, it all comes down to your mindset level. Someone may not agree with
your choices, actions, goals. It doesn't matter. It doesn't affect your mission. It doesnt'
affect your emotions.
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15. PATIENCE
Patience is the ability to wait, or to continue doing something despite difficulties, or
to suffer without complaining or becoming annoyed.
Many traders underestimate patience as a skill. Almost everyone doesn't even focus a
bit on it, because basically everyone thinks to be patient enough at the beginning of
the process, so they don't really spend time in developing or practicing this skill. But
then, a trader executes the trade too early, having a larger stop loss, hence a worse
risk reward ratio. Then, the same trader doesn't wait his take profit target, leaving
more money on the table than if he has patiently followed his trading plan. Too many
traders take patience for a granted skill, with the inevitable result of not considering it
a skill, until for some reason (too much emotional pain, too much money left on the
table, etc.) they decide to focus on its development.
The benefits of patience are huge:
• Execution's improvement
• More willingness to master your emotions
• Better decisions
• More long term vision
The most direct and powerful benefit is the improvement of your execution. In fact, if
you are a patient trader, nothing will worry about the execution of your trading
system. A common mistake is to anticipate trades before receiving an actual signal
from your system. This mistake is created by your fear of missing out. You are so
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afraid of the possibility that this opportunity slipping off your hands that in your mind
you decide you have to take this opportunity before it goes away. Most of the time
this trade will end up with bad results because it turns out that the trade is not a trade
you should have taken with your system, so your probability of winning the trade
decreases (remember that trading success is edge + probability + risk management. If
you weaken your edge weaker by not following it, then your probability to win
decreases).
This is one of the worst mistake you can make. The trading world is full of
opportunities every day, every hour. So, you shouldn't worry about an opportunity
slipping off your hands. If you miss a trading opportunity, don't worry, don't get
angry. Just get ready for the next one. It's like waiting for a train in a big station. If
you missed one, you just take the next one a couple of minutes later. Trading success
is made up by hundreds, thousands of trades. Thinking that you can be successful
with one trade is absurd. Thinking you can become successful breaking rules (what
you're doing if you don't wait for your setups) is even more absurd.
The influence that patience has on your emotions is remarkable.
If you think about the thoughts in your mind for a bit, while you are taking a trade for
the fear of missing out, you will understand how your emotions are involved. When
you decide to jump in a trade, there is a lot of anxiety in your mind. "What happens if
I miss this trade?", "If I don't take this trade I will don't take trades today", "If I don't
win trades I will not become successful", "I have to take this trade, otherwise I'm a
failure", etc.
Your emotions run in your mind like a machine, ruining your judgment and your
decisions resulting in poor execution and a worse outcome.
It does not end here. Many times, after you take the trade, you are aware that you are
breaking your rules resulting in more emotional fights. "Oh my God, I broke my
rules, I have to close with a small loss so it will not be that big", "I broke rules once
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so I'm a failure", etc.
A patient trader doesn't have these problems. He knows he doesn't have to break the
rules because starting to break the rules is the first step to starting to doubt your
system and then yourself.
A patient knows that there are plenty of trading opportunities, so if he doesn't see a
setup to take with his system, he will just wait.
The consequence of improving your execution and controlling your emotions is the
ability to make better decision in the trading world. One trade is an isolate scenario,
but if you can use your patience for every scenario you face on a daily basis, then you
create a pattern in your mind. This pattern will help you to make better decisions as a
trader. The same thing, with the opposite result, is created when you keep breaking
the rules for the fear of missing out. You create the pattern of breaking the rules in
your mind, so your decisions will get worse, day after day.
The human mind creates patterns through repetition. That is why it is important to
choose the right actions to do in your routine. You can always change a pattern in
your mind, but once you create one, it becomes harder to change as you continue to
reinforce this pattern that repeats itself over and over again. Nothing is impossible,
but you will need a lot of confidence in your skills if you want to do it. But this is
another story.
If you can be a patient trader for 1, 10, 100, 1000 trades, you will develop patience as
a skill. Once you develop patience you will have a better vision in the long term.
Mastering your emotions in one trade to have a better execution in that trade is a
short term action. Mastering your emotions in 100 or more trades to have a better
execution in those trades is a long term action. When you see your trading edge
executed over and over, your mind will start to realize that success is created in the
long term through a repetition of similar scenarios over and over again. When you
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understand this, you will begin to focus better on your long term goals, trusting more
your process of achieving big results. Improving your long term vision will
consequently improve your short term execution. Going back to the first example,
when you develop a long-term vision you will not be bothered by a missed
opportunity in the short-term, because you know that one trade in the short-term
means nothing and what matters is much more trades to succeed in the long-term.
Patience is that skill that seems so easy to develop, but instead it is one of the hardest
to acquire because in the process of building patience you have to calm almost any
emotion.
The first step in developing patience is to reflect with yourself, trying to understand
what is the reason of your impatience. The reason of your impatience may be
different from the reason for the impatience of another trader. You need to understand
the source of your impatience so you can focus on resolving the issue.
There are many many reasons that develop impatience in a trader. Some examples
are:
• Urge to make money. You focus too much on making money ending up in
losing more money because you don't have the right skills and you take very
risky actions to satisfy your desire.
• People's judgment. You focus too much on what people think of you, your
business and how you live your life, that you are forced to take inadequate
actions to prove that other people are wrong.
• Other people's success / no results. Seeing other people succeed while you
don't make too many steps forward may cause impatience and lack of trust in
your process.
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How to develop patience
• Focus on the bigger picture
• Focus on yourself and on your journey
• Stop thinking about money
• Practice with long goals
• Meditate
If you have ambitious goals, it's very common to not see results in the short-term.
You could go weeks, months, even years without being close to your big goal. Your
mind starts to trigger you saying "why do you keep wasting your time?", creating bad
emotions that haunt you again and again. There is a reason why 90% of traders
decide to give up within 5 years from their trading career's start. In fact, more years
go by and more traders decide to quit trading. After 6-8 months from the start, the
largest group (more than a half) decide to quit. This is the group of traders with less
motivation and less self-discipline.
Then, the % of traders who give up starts increasing, month after month, up to 90%
or more after 5 years. These years are the years where some specific skills like
patience are put to the test. Some traders are destroyed by the huge amount of time
required to overcome the learning curve, while others gain the skills and the
experience needed to become a successful trader.
Time is an important variable in your trading journey. They say that only 5-10% of
traders are successful in this business. For this reason it cannot be said that starting
from zero to become a successful trader is an easy journey. But this is true for every
area of life. You can't pretend to become a top 1% trader if you think, work and act
like one of the 99% of traders. This is why you constantly focus on the bigger picture.
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You can feel bad one day. It's only one day. You can make mistakes one day. It's only
one day. The important thing is what you do in 7, 30, 365, 3650 days.
Every top 1% in any field spent an enormous amount of time practicing and gaining
experience. Trading is the same. It's not complicated at all, but to be a successful
trader you need to develop valuable skills such as self-discipline and confidence.
One of the worst thing you could do is to live your life because someone else has told
you to live your life in a specific way. Critics are always a big enemy of novice
traders. The more time you spend training or practicing to master some abilities and
the harder the critics will be. This is normal, if you consider that success for the
average person in the world is getting a 9-5 job and work for someone else for 40-50
years. Actually, there is nothing wrong with that. Some of these people may be the
happiest people in the world. The problem is people who spend all their lives
complaining about their job and their life, doing nothing about it. These are usually
the same people who criticize you calling you crazy, stupid, ignorant. These are the
same people who will call you lucky if you eventually achieve success.
So, why bother with these people's opinion while you are focused on creating
something bigger than a 9-5 job?
If you are still concerned about other people's opinions, then think bigger and commit
yourself to turn your thoughts in reality. When you are driven by an ambitious goal
and you work hard to achieve it, you will be too busy pushing yourself and reaching
your goals to not have time to think about other people's opinions.
In your process of becoming a successful trader you should not focus on money at all.
Your only focus should be to get better every day. Once you develop a few skills, you
can start focusing on risk and execution of your trading system to build yourself and
your account. Only after that you can start focusing on money. When you are able to
execute your system and manage risk, you can start scaling up your growth with
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specific plans. If you don't develop skills, or even worse a trading system, the focus
on money will only kill you. It's crazy to think of people who start trading and after
two months they consider trading as the first source of their income.
Usually, the human mind increases the conflict between its emotions when money
involved increases. Think about it. When are you most afraid during a trade? When
more money are on the table.
If you cannot learn to control greed, greed will slowly destroy you in trading.
Meditation is also a valuable practice to develop patience.
If you can reduce stress and anxiety, your mind will surely approach trading in a
better mood. An increase in your focus and awareness will improve your
effectiveness.
Meditation is maybe the most common practice in the trading world to build patience
and to master emotions. As everything, it takes time to see the benefits of this
practice.
The best way to develop patience, even outside trading, is to practice with big goals.
Big goals are goals where you are forced to "practice" patience to reach the end line.
Are you a reader? Have the goal to read a 1000-page book. Are you a runner? Have
the goal to run 1000 or 2000 km in a year. Choose activities where you need to show
up and keep practicing almost every day to achieve the end goal. You don't read a
1000-page book if you give up at page 100. You don't run 2000 km in a year if you do
nothing for 8 months. There are tons of activities you can exploit to develop patience.
The important things are:
1. Choose an activity you like to do, so you are pushed to reach your goal
2. Choose a big goal to reach with time and dedication
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This is a very useful practice because you don't build only patience, but you build
also consistency and self-discipline. You build consistency when you repeat one or
more activities every day. You build self-discipline when you don't need to rely on
your motivation anymore, but your actions are automatic.
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16. INTERCONNECTION
A great benefit you have when you start practicing to build an iron mindset is the fact
that all the skills are interconnected. When you start to build a skill, you will
indirectly start to build also another skill. For example, if you want to start building
self-discipline, you will also start building consistency. In fact, to build selfdiscipline, you need to be consistent over weeks / months. While you build selfdiscipline you need to develop patience to endure a long period of time where you
repeat the same actions with no guaranteed results.
Building self-discipline allows you to have an "easier" path to develop confidence. In
fact, while you build self-discipline, you gradually learn how to quiet and control
your emotions, which is a critical point for your confidence.
This example can be made by starting from every skill. So, as long as you dedicate
some time every day to develop every skill, your results will grow exponentially as
days go by.
There are many discussions about which skill is the most important one. The answer
is obviously all of them. Each skill is important and give you benefits in different
ways. If you really wanted to find a "best" one, it would be consistency. Without
consistency you are nothing. With consistency you can do anything. Any skill you
build and develop is through consistency. If you are not consistent in repeating the
action required to develop a skill your efficiency will be significantly lower.
Another great benefit is the fact that these skills are life skills, not necessarily trading
skills. If you follow the live markets, you will have limited time to build your skills.
Thus, you can take advantage of the hours when the markets are closed or simply
when you are not trading to continue your development (many examples are in the
previous chapters). Some people may actually already possess some of these skills.
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Just think of a top athlete who starts trading with already self-discipline and
consistency through his huge amount of hours of training. This is why there are a lot
of differences between traders. Someone can become a successful trader in 3 years,
another one in 5 years, etc. You can understand now that comparing your journey on
day 50 to someone else journey on day 900 is completely nonsense.
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17. MATURITY
Maturity is the final step of your journey to become a successful trader.
This should be the main goal of every novice trader who starts this long process. The
length of this process actually discourages many traders. In fact, the % of traders who
can endure the pain of enduring the learning curve and find success is very low.
Someone says the percentage is 10%, someone else says 5%, someone else even less
than 5%. The truth is in the middle. Becoming a successful trader is a very difficult
task to accomplish. There is no doubts about this. People who say the opposite are
probably traders with 3-4 months of winning streaks or people who never trade.
Trading is not difficult because you need to find a successful system to make you in
the markets. It is difficult to find a profitable trading system, but this is only a little
piece of the adventure. Dealing every day with your thoughts, fighting against your
emotions, doubting your trading system (even if it is a profitable trading system),
doubting yourself, etc. This is the real test you face. Many people can't endure the
pain, and there is nothing wrong about it. If you can't keep up with your emotions, if
you are forced to live a sad and depressing life because your emotions turn you
upside down, then maybe you should redefine your priorities. The human mind is that
strange part of your body that has the power of sabotaging yourself over and over
again, but also the power of turning every negative scenario in a positive opportunity
to improve yourself. The secret is how you use it.
For this reason, you look back to your years of pain, suffering, hard work, emotional
breakdowns, strives and you understand that everything was worth it. To be part of a
very restricted group like the 5% you can't think and work like the 95%. Being part of
the 5% requires sacrifices that not anyone is willing to make. Almost every time,
there is no talent. Talent is showing up every day, developing yourself over and over
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and over until you find success. That's why when you become a successful trader you
realize that all the work you've done is worth it. The benefits you have on being a
successful trader are huge:
• You can work where you want
• You can work when you want
• You have no boss, no clients
• Trading compounds money like no other business in the world
As a successful trader, you are disciplined on executing your trading system and your
plans. You don't fear your emotions anymore, you actually mastered them. You are
patient in waiting for your trades, you don't rush with the goal of wanting more
money because you know that money will come thanks to your edge and your system
that you deeply trust. Risk is not a problem for you. In fact, you embrace risk,
knowing that risk is the main concept that trading is focused around. However, it's
obvious for you that there is a big difference between a calculated risk and a stupid
risk.
You went through a long journey, but you can still remember the difference you had
in the beginning when you were still an amateur trader.
So you look back thinking about all your work done, understanding that 90% of the
time is "wasted" on testing concepts, setups, systems, making mistakes, learning,
making more and more trials, making more mistakes, focusing on things and
concepts that now you define useless, etc. But in the end, you are 100% sure that all
that time is not wasted, but it's part of something very important for you to become a
successful trader that is called experience.
Reaching this point is really remarkable, but now you realize that this is not the finish
line. You are just getting started. So you go deep in your thoughts and you realize that
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there isn't a finish line. You just have more and bigger goals. Over and over. For this
reason trusting the process from your day 1 is important. Critical.
It's not the goal, it's the journey.
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THANK YOU
Thank you for buying Iron Mindset. Your trust and your support mean a lot to me. I
really hope this guide can help you in your next steps to become a successful trader.
Remember to not just read this guide. Practice and training should always be part of
your routine. Note that in the guide there are clear steps to follow to develop and
master different skills. So make plans, show up every day and be consistent in what
you do. Be patient along the way because trading success takes time.
If you have any doubts or questions about the guide, if you have some specific topics
you would like to be included in the next updates, do not hesitate to DM on Twitter or
Instagram or send me an email to admin@moneytradeedge.com, I will be happy to
help you.
Don't forget to come back on Gumroad and click the “Five stars” button when you
see your first improvements on your trading journey. It's the best thing you can do to
increase the value of this guide and it really means a lot to me.
I wish you the best,
Andrew
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