In the early days of my trading journey, I used to get very discouraged during a drawdown.

As soon as I hit a drawdown, I would assume that the strategy had stopped working and would jump to a new trading strategy.

That's the last thing we should do as traders.

I've learned a lot since then and I want to help you avoid this mistake by giving you the tools and techniques to properly overcome the natural doubts that come with a drawdown.

The optimal trading drawdown psychology is to examine the drawdown as objectively as possible. First assess if the drawdown is within the normal parameters of your trading strategy. If it's not, then review your data to find out why, and figure out a way to fix it. 

Obviously there's more detail to this process and that's what I'll be covering in this article. 

Drawdown is an inevitable part of trading and can be difficult to manage.

However, the way you react to drawdown will have a significant impact on your success.

So if you want to become a more resilient trader and worry less about your drawdowns, here's what you need to know.

Understanding Drawdowns in Trading

First, it's important to understand how a drawdown is defined because that lessen can the psychological impact of your losses.

When you understand what a drawdown really is, you can more objectively understand if you should be concerned about a series of losses or not.

Defining Drawdown and Its Importance

Drawdown is a term used to describe the decline in a trader's account from its peak value to its lowest point before recovering to a new peak value.

This is an essential concept in trading because it can help traders understand the risks involved in their trading strategies.

Drawdowns are typically measured as a percentage of the peak equity value in the account.

For example, if a trader's account has a peak value of $10,000 and then declines to $8,000, the drawdown is 20%.

It's important to note that drawdowns are not the same as losses.

You could have a few losses on the way to your account balance reaching new highs.

So a few losses is normal if you have a properly tested trading strategy.

Measuring Drawdown: Maximum Drawdown and Duration

Maximum drawdown is the largest decline in the account value from its peak to its lowest point before a new high.

This is a crucial metric that traders use to evaluate the risk of their trading strategies.

The maximum drawdown can be calculated as a percentage of the peak equity value or as a dollar amount.

But using a percentage is usually much more useful.

It's easy to calculate maximum drawdown.

Simply look at your performance graph in percentage gained/lost and look for the biggest drop from high to low.

If you want to get more precise, you can simply export your trading log into Excel and use this formula.

There is also software that can show you stats on your live trading and backtesting.

Here's an example from NakedMarkets.

Drawdowns can also be measured by their duration, which is the length of time between the peak and the trough.

The duration of a drawdown can vary significantly, depending on your strategy and the market conditions.

Short-term traders may experience more frequent and shorter drawdowns, while long-term traders may experience more extended drawdowns.

So it's important to understand both the magnitude and duration of your normal drawdowns, for reasons I'll get into in a bit.

The Role of Leverage, Volatility and Risk Per Trade in Drawdowns

Leverage and volatility are two factors that can significantly impact the drawdowns in a trader's account.

The amount of leverage you use will amplify the gains and losses in your account, which can lead to more significant drawdowns.

Many times, just lowering your leverage or risk per trade can make a drawdown tolerable.

A common misconception about trading strategies is that if you increase the risk per trade on a profitable strategy, that simply amplifies the amount of money the strategy will make.

Not true.

Often lowering the leverage or risk per trade will lead to better results because you won't be as stressed about the outcome and are less likely to make irrational mistakes.

Volatility can also impact drawdowns by increasing the frequency and severity of market movements.

High volatility markets can lead to more significant drawdowns, especially if the trader's strategy is not suited to the market conditions.

So it's important to understand if your strategy benefits from volatility or is harmed by it.

Psychological Impact of Drawdowns

Drawdowns are an inevitable part of trading, and they can have a significant psychological impact on you.

In this section, you'll explore the emotional responses to losses, cognitive biases during drawdown periods, and the effect of stress in decision-making.

Emotional Responses to Losses

Experiencing drawdowns can trigger a wide range of emotions, including fear, greed, frustration, and disappointment.

It could trigger that time you lost in the high school wrestling championship or when you got fired from a job.

Guilt and fear of further losses can cause traders to become overly cautious, leading them to miss out on potential opportunities.

On the other hand, greed can drive you to take unnecessary risks in an attempt to recoup your losses quickly.

It's essential to acknowledge and manage these emotions to prevent them from clouding your judgment and leading to poor decision-making.

The first step is being able to sit with your negative emotion and not run away from it.

If you're able to feel the emotion fully, it usually starts to dissipate.

One thing you can ask during this time is why you're feeling this way.

You might even start to get solutions from your subconscious mind.

It might sound weird, but try it.

I've used it and it has worked on many occasions.

Cognitive Biases During Drawdown Periods

During drawdown periods, traders may also experience cognitive biases that can affect their decision-making.

For example, confirmation bias can cause traders to seek out information that confirms their existing beliefs and ignore information that contradicts them.

Similarly, loss aversion bias can cause traders to become overly focused on avoiding losses rather than seeking out gains.

These biases can lead to missed opportunities and poor trading decisions.

Stress and Decision-Making in Trading

Trading can be a stressful activity, and drawdown periods can exacerbate this stress.

Stress can impair decision-making and lead to impulsive and irrational decisions.

It is essential to manage stress levels by taking breaks, practicing relaxation techniques, and maintaining a healthy work-life balance.

Also examine what kind of content you're consuming on a daily basis and who you're hanging out with.

Negative news programs and stressful music can compound your stress.

Same goes for negative people. 

Figure out how to minimize the impact of these things on your life and you can lower your stress dramatically. 

I would also suggest putting trading in context and seeing the bigger picture.

Risk Management and Mitigation

Developing an effective trading plan is the cornerstone of successful trading.

A trading plan includes a set of rules and guidelines that dictate how a trader approaches the market.

Your plan should be based on your risk tolerance, objectives, and trading style.

Remember to always backtest your trading plan before ever risking real money.

Then stick to the plan.

Importance of Position Sizing and Stop-Loss Orders

Position sizing is the process of determining the appropriate number of shares, lots or contracts to trade based on a trader's account size, strategy and risk tolerance.

Stop-loss orders are an essential tool for risk management.

They allow you to limit your losses by automatically closing out a trade if it reaches a predetermined price level.

Not all strategies need a stop loss of course, but most traders will benefit from using them.

If you have a small account, you should also consider using nano lots. They are a great way to manage risk.

Understand the Parameters of Your Trading Strategy

One thing that doesn't get talked about enough online is the idea of backtesting your strategy so you understand the maximum historical drawdown of your strategy.

This is extremely important because if your current drawdown is within the normal historical drawdown for the strategy, then you probably have nothing to be worried about.

Of course, you should always make sure that you're executing your trading plan correctly.

But if you are executing as planned, then a normal drawdown is nothing to freak out about.

Knowing your maximum historical drawdown can take a lot of pressure off you and be more in flow. 

Optimize Your Risk Metrics and Money Management

Another area of risk management and trading psychology that doesn't get enough attention is the concept of tailoring your maximum drawdown to your personality.

For example, let's say that “SuperTraderX” tells you that you should risk 2% per trade with his strategy.

He's a successful trader, so you follow along.

But the drawdowns at that risk per trade can be upwards of 60%.

Most traders cannot handle that level of drawdown, so they quit the strategy, even though the strategy is obviously profitable over time.

What a lot of aspiring traders don't realize is that a strategy could work really well for them, if they simply lowered their risk per trade.

Sure, they won't make as much money as SuperTraderX, but they could handle the drawdowns much better.

Maybe they lower their risk per trade to 0.5% per trade and their maximum drawdown drops to 27%.

That's a lot more tolerable for most people.

From there, you would just need a bigger account to make the money that you want to make.

You can figure out your maximum historical drawdown by backtesting your trading strategy with as much historical data as possible.

Then plug your trades into a Monte Carlo Simulator to get the maximum drawdown over many simulations.

If you can live with that maximum drawdown, then great, the strategy is good to go.

However, if that maximum drawdown is beyond your comfort level, you can plug the results of your backtesting into this risk calculator to give you the amount you should risk per trade to avoid losing more than you're comfortable with in a drawdown.

So if you only want to have a maximum 27% drawdown, then you would plug that into the calculator, along with some other stats from your backtesting, and it will spit out how much you should risk per trade to achieve your goal.

Strategies for Recovery and Growth

Now that you understand the key concepts related to drawdowns and how they can affect you, let's take a look a some solutions, if you find yourself in a drawdown.

If you follow this logical process, you'll start to see how to minimize the impact of drawdowns on your trading psychology.

The Drawdown Might be Normal

The first thing to consider is if your current drawdown is normal.

If it's within the parameters of your backtesting and Monte Carlo Simulation results, then you probably have nothing to worry about.

Just be sure to double check that you've been following your trading plan.

But if you're trading your plan and your current drawdown is less than your historical maximum drawdown, then there's no need to freak out.

It's all good, relax and carry on trading your plan.

Has Your Trading Strategy Stopped Working?

Now if your current drawdown is larger than your maximum historical drawdown, then it's time to do some analysis.

The question you have to ask is:

Has my strategy stopped working, or is this just an unusual situation?

For example, there might be some once-in-a-lifetime type news event that came out that moved the markets unexpectedly.

If that's the case, then your strategy is probably still sound, but you should look into how to mitigate these situations in the future.

On the other hand, if it looks like your strategy may have stopped working, then there are 2 things that you can do to figure out if it has really stopped working:

• Take less risk per trade
• Only trade in a demo account

You should continue trading the strategy in come capacity because you want to see if your results go back to normal.

But if your drawdown continues to get bigger, then that might be a sign that your strategy has stopped working and you might have to update it or ditch it altogether.

Psychological Readiness and Emotional Control

Maintaining psychological readiness and emotional control is essential for recovering from drawdowns.

Traders who are emotionally affected by losses may make impulsive decisions that can lead to further losses.

It is important to have a positive mindset and a clear understanding of the risks involved in trading.

One effective strategy for maintaining emotional control is to be sure that you're in an optimal mental condition to trade and take frequent breaks during the day to relax.

Even if you aren't trading, taking a break is a simple way to stay focused and have more fun.

Trading doesn't have to be so serious all the time.

Final Thoughts on Optimal Trading Drawdown Psychology

As traders, we get paid to deal with uncertainty.

If you prefer certainty, go get a 9 to 5 job.

But if you really want to make it as a trader, drawdowns come with the territory.

On a positive note, drawdowns can be valuable learning experiences.

By analyzing the causes of a drawdown, you can identify areas for improvement and develop more effective strategies for the future.

To learn from drawdowns, be sure to identify the root cause of the losses.

This may involve analyzing trading data, reviewing trading decisions, or seeking feedback from other traders.

Once the root cause has been identified, you can develop strategies to address the issue and improve their performance.

If there is even an issue at all. 

Understand your trading strategy, keep good records and maintain a positive mindset and you'll give yourself the best chance of getting out of a drawdown quickly.

The post Trading Drawdown Psychology: How to Analyze a Losing Streak appeared first on Trading Heroes.

A lot of things in your life can affect your trading performance.

You might have had an argument, or just have many things going on at the same time.

The more distracted you are, the more your trading results will suffer.

Mediation can help you get into the right mindset before you trade.

Watch this video and do the exercises before trading to settle yourself and increase your chances of trading well.

It's a short video that won't take up too much time, like some other videos out there.

How to Use This Video

This video is meant to be used before you start trading.

It will help you calm your mind and get into the best mindset for trading.

The process is very simple process and anyone can do it.

Just follow the instructions and don't overthink it.

If you don't quite understand a certain part of the video, do your best and go with it.

Things will work out as they should.

When your mind and body are relaxed, you'll be ready to trade.

Steps in This Video

There are 3 primary steps in this video.

I'll outline them here so you have an idea of how the process works.

The first step is to get your body into a very relaxed state. 

You'll do this by doing a simple breathing exercise.

If there is a part of your body that's particularly tense, I have a special technique for helping you release it.

I've learned this process through the many breathwork classes I've attended.

Next, I'll connect you to the feeling of gratitude. 

When you feel grateful, it's much easier to visualize your goals as completed and thus lowers your resistance to achieving the goal.

Finally, I'll connect your trading goals to this feeling of gratitude.

The most important thing to remember that you cannot will yourself to be profitable during every trading session.

Whatever the market does is beyond your control. 

But you can control if you follow your plan or not.

However, if you have a backtested plan and you follow it, then you'll usually be profitable over time.

This process might seem a little weird at first.

But use it consistently for a few weeks and you'll start to feel and see the benefits.

The Benefits of Meditation

Mediation is a proven method for focusing your mind and getting in touch with your inner guidance.

It's been used for thousands of years by many cultures around the world. These cultures wouldn't do it if it didn't work.

You can learn more about the benefits of meditation in this guide.

The post Guided Trading Meditation (Daily Preparation for Traders) appeared first on Trading Heroes.

Most traders will experience a large trading loss at some point in their career. That generally happens in the beginning when they are first learning, but it can also happen later if they become overconfident.

The key to coming back after a large loss is to stop trading, review your process, then make the necessary adjustments. After you've made the proper adjustments, start trading small before you step back up to your full risk per trade. 

Now I'll break down the details into 7 simple steps that you can follow to do this.

Step 1: Take a Break From Trading

A big loss is very stressful and you don't want to compound that stress with more losing trades.

So you need to stop trading and examine why you had such a big loss.

If you keep trading, it's very likely that you'll continue to be frustrated and lose even more money.

It also helps to get out of the environment where you had the losses. So go to a coffee shop or sit out in your back yard while you're doing these steps.

Different surroundings will help get away from the mindset that got you into those losses.

Once you understand why it happened, it will be much easier for you to implement a solution and you can go back to your trading desk with confidence.

Step 2: Accept Full Responsibility

In order for you to improve your results, you'll have to take complete responsibility for your actions.

That means you cannot blame your broker, your computer, or the tip you got on Facebook.

Your results start and end with you. 

The great part is that since you created this problem, you can also create the solution to fix it.

Once you accept that, you're ready to move on to the next step.

Step 3: Review Your Trading Journal

This is the step that most blog posts leave out.

Reviewing your trading journal is the key to figuring out why you lost so much money and how to prevent this from happening again in the future. 

If you don't have a trading journal, see what I currently recommend here.

You cannot figure out the problem if you don't know the cause. And you cannot figure out the cause without looking at the stats on your trades.

Without a journal, you're just guessing as to the source of the issue. For example, you might think that the cause is your trading system, but the cause is actually your lack of discipline.

What if you didn't keep a trading journal at the time of the big loss?

Go back through your trade history and create screenshots of every trade.

Compile stats on all of your trades.

Create notes for each trade. You won't be able to remember everything obviously, but do your best to write down why you entered, exited and modified trades.

Once you have that information, it's time to examine the data closely and identify the problem.

Step 4: Identify the Specific Issue(s)

At this point, you should have a very good idea of why you had such a big loss.

Let's take a look at a few of the most common reasons that traders lose big money.

This list might help you realize a reason that you've missed.

1. Moving the stop loss
2. Taking too much risk on one trade
3. Not having a tested trading strategy
4. Not following the rules of your strategy
5. Taking trades that are not part of your strategy
6. Adding more positions to a trade
7. Not having a written trading plan
8. Trading too many markets/trades at the same time
9. You have to work on your psychology

Write down the biggest reason you had a huge loss. The more specific you can be, the better.

If there are multiple issues, write down the top 3.

Great, now you know the cause of your big loss.

That's half the battle.

Step 5: Develop Specific Solutions

Alright, now I'll give you some solutions to each of the causes listed in the previous step.

Many of these problems are easily solved once you know what they are.

Not Having a Tested Trading Strategy

This is the most common reason for big trading losses.

New traders will take trades without a tested trading strategy.

They will learn a new strategy on YouTube, then immediately jump into trading it in their live account.

I'm not judging because I've certainly been guilty of this when I first started trading.

But how do you know that the strategy is actually profitable?

Are you going to trust the video just because they showed you a couple of well-chosen examples and had some fancy graphics?

Of course not.

That would be like trusting a fancy TV commercial that says a car is super reliable when the car company has only been in existence for 6 months. There's simply no data to back up that claim.

You have to test the strategy to see if it has worked over a long period of time. 

Learn how to backtest in this tutorial. In many cases, you should also forward test the strategy.

Once you have historical data that shows that a strategy as an edge, you'll have more confidence to take trades and you'll know when the strategy has stopped working.

Moving the Stop Loss

This can be a big one for some traders.

They want to give the trade “a little more room,” so they keep moving the stop loss to give the trade a better chance of working out.

I've never ever met a successful trader who consistently moves his/her stop losses.

When you take a trade and set a stop loss, you lock in a fixed amount of risk.

If you move a stop loss, you add more risk to the trade.

Even if you tested your strategy, it won't perform the same if you move your stop loss because you're changing your risk parameters.

The bottom line is that moving your stop loss to create a bigger potential loss is never a good idea. 

So you have to choose if you want to be a successful trader, or you want to move your stop loss and keep experiencing big losses. 

Taking Too Much Risk on One Trade

I call this the “lottery syndrome.”

Traders are so sure that a trade will work out that they risk a large percentage of their account on 1 trade.

They never stop to consider what will happen if the trade doesn't work out.

Remember that if you lose 50% of your account, you'll have to make 100% in profits to get back to breakeven. 

That can be challenging, even for the best traders in the world.

So keep your risk low and either work on having a high win rate, or having winners that are much bigger than the losers. 

Remind yourself that trading is about becoming wealthy over time, NOT getting rich quick.

Not Following the Rules of Your Strategy

Taking trades that are not part of your strategy comes down to a lack of discipline. 

An effective way to change this is to remind yourself of how painful your big loss was.

Really feel it. 

I'm not saying that you should dwell on it. But simply remind yourself of what could happen of you don't follow your system.

Then imagine the opposite.

Picture yourself as a successful trader. See the house you would live in. Visualize the car you would drive. 

Now which life do you want to live?

Do you want to live in pleasure or pain?

Your long-term outcome is the result of every single trade to you take. 

Adding More Positions to a Trade

The practice of pyramiding, or adding to a winning trade, is something that many successful traders do.

But if you get this wrong, it only multiplies a losing trade.

So again, only pyramid if you've tested the strategy.

If you're adding more lots to a trade randomly, then that's a recipe for disaster.

Do not add to winning trades unless you have a profitable strategy without the additional trades. 

Then only introduce pyramiding after you've tested the pyramiding strategy and shown that pyramiding makes the base strategy more profitable.

Trading Too Many Markets/Trades at the Same Time

Having too many trades open at the same time can lead to a loss of focus and a large loss.

This can be very discouraging and lead to a loss of confidence and a downward spiral of losses.

The solution here is simple.

Limit the number of trades you can have open at the same time.

Most traders limit the amount of risk that they take per trade.

You probably do that already.

Now limit the amount of open risk you have at any one time.

Let's say that you want to limit your open risk to 10% and you risk 2% per trade. That means you can have only 5 open trades at any one time.

Using a very simple formula like this will help you keep your risk in check and prevent large losses, especially in correlated markets.

You could also limit the number of trades you can have open, regardless of risk. So maybe you set your limit at 5 open trades.

Doing this will allow to focus on managing those trades and you won't lose a lot at once if they all end up losing money.

It will also help you keep your sanity. 

Not Having a Written Trading Plan

Having a written trading strategy is essential to success.

When you're trading multiple strategies, or you've tested many trading strategies, the lines between the strategies can become blurred.

It can be easy to forget the rules of the strategy you're trading live.

Therefore, having a written trading plan is essential to maintaining consistent results.

If you forget your rules, you can always reference your plan.

You'll also be able to see if you followed your trading plan or not, when you review your trading journal.

If you don't have a written trading plan, you can download the free PDF worksheet here.

You Have to Work on Your Psychology

Now what if you know what to do, but you cannot seem to do it? You find yourself entering random trades, when you know you should follow your rules.

Then the issue is with your psychology.

This is a very deep subject and is beyond the scope of this tutorial. But if you want detailed information on how to change your psychology, read these posts.

I also wrote a comprehensive article on how to explore and upgrade your deepest psychology here.

Hint: Your BIGGEST trading gains will always come from working on your psychology. 

Step 6: Start Trading Again, But Keep It Small

Once you have a plan in place, now it's time to ease back into trading.

I would suggest starting small and working your way back up to your full size.

It's like an athletic injury.

Let's say that you hurt your knee playing basketball.

You aren't going to start playing basketball at full speed right after recovering from your injury.

The smart thing to do is to ease back into playing.

Then once you're confident that you're fully healed, you can start playing all out again.

In trading, the equivalent is to trade a fraction of your normal trade size.

For example, let's say that you usually risk 2% on every trade.

While you're getting back on your feet, consider only risking 0.5% per trade.

Once you get your confidence back, then you can go back to risking 2% per trade again.

Step 7: Continue to Track Your Results

Once you're trading profitably again, your job is not over.

Continue to journal your trades keep an eye on your performance.

Review your performance on a regular basis, whatever makes sense for the way you trade.

If you trade frequently, then review your journal once a week.

Don't trade that often? Then a monthly review is probably enough.

When you stay on top of your results, you'll be less likely to make the same mistake that led to your huge loss.

Final Thoughts

Recovering from a large trading loss is all about reviewing your process, making adjustments, then slowly getting back into trading your full size.

There can be a lot of shame and frustration that comes with losing a big chunk of your account.

But if you can detach yourself from those negative emotions and objectively review your results, you're very likely to find the solution. 

Keep going!

The post How to Recover After a Huge Trading Loss appeared first on Trading Heroes.

There are 2 types of edges in trading, a trading strategy edge and a trading psychology edge.

You need to have both to succeed.

This post will focus on how to develop your mental edge, which is the more important of the 2 types.

The process of developing a trading psychology edge is simple, but usually not easy.

1. Start trading
2. Identify your advantages and weaknesses
3. Find solutions to your weaknesses
4. Review your results
5. Repeat steps 3 and 4 until you reach your goals

In this post, I'll give you strategies to uncover your trading genius and overcome your biggest roadblocks.

Keep reading to learn the details of each step.

1. Start Trading

This step might seem obvious to some people, but it won't be to others, so I'm going to talk about it.

In order to develop a mental edge in trading, you have to engage the markets on a regular basis.

Even if you only demo trade, taking trades will start to expose your psychological strengths and weaknesses, within the context of trading.

Here are some things that you might discover after you begin trading.

• You're afraid to take trades
• It's easier for you to follow a rules based trading strategy
• You have a tendency to revenge trade
• You're good at riding trends
• You take good notes
• You don't like backtesting
• You get easily discouraged after a series of losses

That's just a short list of what could come up for you.

But you'll only discover these things when you go through the process of taking trades and experiencing the emotional ups and downs that come with wins and losses.

Once you've taken some trades, now it's time to take an inventory of your strengths and weaknesses.

2. Identify Your Advantages and Weaknesses

Awareness is the first step to improving your performance in any area.

How many times have you experienced an event with a group of people and they noticed things about the event that you missed?

This is because they were aware of those things and you weren't.

You also probably noticed things that they didn't.

That shows that we will only notice things that we place our awareness on.

So start a trading journal and write down what you're good at and what you aren't so great at, while you're trading.

This is the first step to full awareness.

The things you do well will give you clues as to what you should probably focus on in trading.

For example, if you find it easy to follow a trend on the daily chart, then you should probably work on trading some sort of trend following, swing trading strategy.

If you lose a lot of money when you day trade, then that's probably something you should avoid.

Maybe you live in a timezone that makes it difficult to trade the New York Forex session. Then you could work on a strategy that trades the Asian session or the London open instead.

Like with any other skill, there will be things that are optional, and there will be things that you have to change.

In the case of day trading versus swing trading, you don't have to day trade. You can trade on other timeframes, so being bad at day trading is not a problem.

But let's say that you have a tendency to over trade and revenge trade.

That's a problem that has to be fixed if you want to become a successful trader.

So find ways to amplify your strengths.

That's pretty easy.

What about your weaknesses?

That will probably take a little more effort.

Here's how to get started with overcoming them.

3. Find Solutions to Your Weaknesses

The great news is that there are a ton of solutions out there to help you overcome anything you're working on.

You simply have to do the work to seek out these solutions and implement them.

I cannot list all of the strategies available because there are so many of them.

But I'll get you started with the 2 general categories.

I believe that there are only 2 parts to the human mind, the conscious and subconscious.

Yeah, you probably knew that already.

However, I feel that many therapists and coaches don't understand how to apply this concept effectively. Many are trained in a particular type of treatment. Most only follow the doctrine of that modality and think that everything can be solved through that lens.

Obviously, the more aware ones understand the limitations of their craft. But there are many who do not.

Not entirely their fault. They don't know what they don't know.

There are a lot of things that I don't know either.

But I do know that it's up you to you to use your intellect to figure out what will work best for you.

That said, let's take a look at a real example of why the conscious/subconscious theory is so important.

I have a friend who used to smoke. If you know a smoker, or you were a smoker, you know that it can be one of the toughest habits to break.

But guess how he quit?

He was on a smoke break at work one day…

He looked the the cigarette, and thought “This is dumb.”

So he quit cold turkey, on the spot.

That's it.

How was that possible?

I don't think that anyone knows for sure, probably not even him. But here's my theory…

There's always a reason why we do things. Our actions fulfill a need or desire in our mind.

Sometimes the cause of a desire sits in our conscious mind. But many times it sits in the subconscious mind.

I believe that the cause of his smoking habit was in his conscious mind. So he could use a conscious thought to change the behavior.

That's why it was so easy.

Now if the source was in his subconscious, even though he knew that smoking was a waste of time and money, it would have been much harder to quit.

So when you look for methods to help you change your behaviors, start with the conscious methods first because those will give you the easiest wins.

But if you cannot change with those methods, then it's time to go deeper and dive into your subconscious. 

It's not always possible to figure out if a behavior is caused by a subconscious or conscious source. It can also be difficult to figure out which part of your mind a treatment will work on.

That's OK.

Do your best and you'll get a good feel for it after trying a few different things.

Conscious Mind Methods

Methods for changing thoughts in your conscious mind usually involve mental visualization exercises, repeating affirmations or visual cues.

• Neuro linguistic programming (NLP)
• Mind Movies
• Visualization
• Vision boards
• Mantras
• Talk therapy

Subconscious Mind Methods

Changing your subconscious mind is a new concept to many people and it's probably new to you too. The reason why this works may not be obvious at first.

You're basically digging down into your subconscious and bringing the causes of your negative behavior to the surface. When you do this, it's much easier to resolve the issue so the symptoms never come up again.

This can be very powerful stuff and you really have to experience it believe it.

• Subliminal recordings
• Hypnosis with a therapist
• Cloud Sound Therapy
• The Emotion Code
• Clairvision

Again, this is just a short list of what's out there. But it will give you a great starting point.

4. Review Your Results

Now it's time to see how you've done.

Sit down on a Sunday morning with a coffee (or your favorite drink) and review your trading journal again.

Did the methods you used work?

If yes, then great, you're done! You can stop reading right now.

However, it's more likely that you still have things that aren't completely resolved.

That's just how it works. 

Unfortunately, modern mass marketing has given us the impression that there's always a pill or hack that we can use to instantly achieve any outcome that we want. 

In reality, that's rarely the case.

It's like mining. Miners almost never hit gold on the first try.

They usually have to do a lot of homework and drill several holes before they find a workable mine.

So put down your discouragement and dig your heels in for the long haul. Your transformation could be fast, but it's more likely that it will be a process.

That's how your great grandparents did it, along with every generation before them.

The idea of instant results is a new and often unrealistic ideal.

5. Repeat Steps 3 and 4 Until You Reach Your Goals

Instead of getting discouraged, do this:

1. Congratulate yourself for taking action.
2. Celebrate what did work. It's very likely that you made some progress, no matter how small.
3. Look for the next thing to try. Assuming you gave the first thing an honest try, it just might not have been a good fit for you.

I've had many cases where this has happened in my life.

For example, back in the day, I used to listen to a lot of Tony Robbins recordings. He's great, I have nothing against Tony.

However, I put too much faith in the idea that he had all the answers. I figured that since he had so many high-profile clients, he must have a solution that could help me.

So I would listen to his tracks over and over, and implement the strategies…over and over.

…and they did help a little.

But they didn't create the big shifts that I was looking for.

Instead of continuing to do something that didn't work, I should have reassessed my results after a few weeks, then tried something else. I just didn't know any better back then, and I'm OK with that.

It literally took me years to figure out that I needed to branch out and try other things.

I want you to learn from my experience.

If you didn't get the results that you expected, then don't get down on yourself.

Remember that one of the the most powerful tools that you can have in your trading toolbox is self-forgiveness.

It will take as long as it takes for you to become successful at trading. So get back up on your horse and keep going.

Of course, there can be the tendency to have “shiny object syndrome,” where you keep hopping to the next new thing. So you have to be honest and ask yourself if you've given the method an honest try, before moving on.

Only you can answer that question. 

Final Thoughts on Developing a Trading Psychology Edge

Most new traders think that the right trading strategy will make them rich.

Experienced traders know that having the right mindset is the real key to success.

A solid trading psychology will allow you to overcome losing streaks, keep expanding your knowledge, and persevere when most people would give up.

Implement the tips in this post and you'll start to see positive results.

Amplify your strengths, heal your weaknesses.

You can do it.

The post Develop Your Trading Psychology Edge in 5 Steps appeared first on Trading Heroes.

When you look for the best trading psychology books online, at the top of everyone's list is usually something like “Trading in the Zone” by Mark Douglas.

That's a fantastic book and it's at the top of my list too. However, there are a few books that have had a huge impact on me, that I haven't seen on any other list.

So in this post, I'll show you my picks for the 3 most underrated books and why I love them.

Trading, Sex and Dying

The title might seem a little strange, but it gives us a hint as to why this book is so valuable.

Juel Anderson was a professional poker player, phone dating operator and funeral home employee.

These experiences taught him a lot about human nature because these situations put people under extreme stress…and that's when their true nature comes out.

Anderson puts people into a few general personality types, based on his experiences. This understanding of human nature helped him as a lot as a pro poker player.

As traders however, we can use this information in a slightly different way. Instead of analyzing the people sitting across the table from us, we should analyze ourselves.

We can understand our own innate strengths and weaknesses, instead of trying to mold ourselves into a personality type that we thing we should be. Reading this book helped me understand that I didn't have to change. I simply had to understand myself better.

The original name of the book was “Poker, Sex and Dying.” But an options trader by the name of Dave Kaplan bought the rights to the book and changed the name.

Kaplan felt that understanding these personality types was key to helping traders become successful.

Spot on Dave.

Get more information about this book here.

When Supertraders Meet Kryptonite

This book isn't a psychology book per se, but it does give us fantastic insight into the psychology of resilience.

All of the traders in this book were at the top of their game, when they experienced a huge loss. The type of losses that these traders sustained are more money than most people will make in a lifetime.

However, they picked themselves up and got back in the game.

If you think that you've had a big loss, this book will help you put your losses into perspective. You'll also learn what these traders did to come back, which can give you tools that you can use when you've had a run of losses.

Many traders give up on trading too soon because of moderate to small losses. Increase your mental toughness by understanding what it takes to push past them.

Learn more about this book, as well as all of the books on my list here.

Trade with Passion and Purpose

The last book is in my top 3 books of best trading psychology books of all time. Yes, it's up there with “Trading in the Zone.”

This book is written by Mark Whistler, and is probably the most underrated trading psychology book of all time. The reason that I like it so much is because he talks about topics that other traders don't even touch.

For example, he talks about why traders should pay attention to intuition. Most trading psychology books tell you to ignore gut feeling, as well as any emotions, and try to view a trading scenario dispassionately.

There's certainly a lot of benefit to seeing a situation objectively and not trading emotionally.

But Whistler takes it to the next level and says that we should also factor in our intuition. He says that we should work on developing our intuition and understand the different levels of intuitive ability.

Other topics that he talks about are:

• Gratitude
• Emotional intelligence
• Understanding fear
• Medical stress
• Affirmation and visualization
• And more

Many of these topics are covered in other books, but Whistler presents them in a slightly different way.

He also interviews experts and people who have experience in these areas, which provides a well-rounded look at the topics he covers.

To find more hidden gems, check out this list of trading psychology books.

Final Thoughts on Trading Psychology Books

So those are my favorite underrated trading psychology books. I would highly recommend reading all of the popular psychology books that people recommend.

They're popular for a reason. 

But when you're done, expand your horizons and look for other books that can take your mindset to the next level. If you search hard enough, you'll uncover gems, like the ones mentioned above.

See the complete list of my favorite trading psychology books here. You can also see the best trading books that I've read.

Happy exploring!

The post The 3 Most Underrated Trading Psychology Books appeared first on Trading Heroes.

Your mindset is the biggest determining factor in if you will succeed at trading or not. It trumps any trading system or indicator.

The mindset of a successful trader is developed through a process of repetition, review and continual improvement. A trader must be willing to keep taking trades, review them in a journal, then take an honest look at what improvements can be made. In addition, traders must continually work on eliminating negative habits and psychological programming. 

There's a lot to unwrap here, so let's dig into the details.

I'll go over each of the elements to show you how you can start building the mindset of a professional trader.

Practice, Practice, Practice

The first important concept to understand when learning to develop a trader's mindset is that you have to be willing to practice your craft.

Just like boxers go to the gym and runners hit the track, traders have to practice their trading strategies to keep their skills sharp.

There are a couple of ways to do this.

First, you can use backtesting software to download historical data, replay the data and take simulated trades. This is similar to a NBA player practicing his jump shot. 

You can practice your trading methods in simulation when you aren't trading, when the markets are closed, or when you don't have an internet connection.

If you can get just a couple more hours of trading practice per week, imagine how much that can compound your skills over time.

Next, you can also open a demo account and take demo trades alongside your live trades. There might be trades that you don't want to take in your live account, but you can still take them in your demo account, and learn from them like they were live trades. 

Again, this gives you more repetitions and more opportunities to fine tune your pattern recognition skills.

Another benefit of using a demo account is that it helps build your intuition.

Not all traders should rely on intuition to make trading decisions.

But tracking your demo trades will help you understand if you can trust your intuition, or if you should just stick to your system rules.

Break Through Your Drawdowns

I have a more risk adverse personality, so I've never blown out an account. That might sound like a good thing, but my type of personality profile also comes with a few downsides.

The biggest downside is that I used to shy away from taking trades, especially in a losing streak.

After a lot of review, I realized that this is the opposite of what I should be doing.

Let me clarify that…

I'm not saying that traders should keep taking trades, if their strategy isn't working, or they are not focused.

…or worse yet, if they don't have a strategy at all.

However, if you're confident that you have an edge, then you should keep trading. By definition, the only way to end a losing streak and make up for the losses, is to keep trading and keep applying your edge.

This can seem like an insurmountable task and it might even seem hopeless…or even a little scary.

But it must be done. 

You must embrace the suck.

If don't want to lose more money, you can stop trading your live account and open a free demo account.

Do what you have to do to keep trading.

Yes, it's uncomfortable because you could keep losing.

When you're in this situation, it's also helpful to ask the following questions:

• Am I attaching too much of my ego to my losing trades?
• Am I insisting on being right, at the cost of being profitable?
• Am I too worried about losing?
• Am I beating myself up after each loss?

If you answer yes to any of those questions, develop the awareness of when you're doing those things.

Work on hitting the “mute button” on those thoughts and learn to review each trade as objectively as possible.

You will learn more about yourself and your trading strategy from pushing through a drawdown, than any other trading activity I know of. 

Once you know that you can successfully overcome a drawdown however, that will give you a ton of confidence that you'll be able to do it again in the future.

Keep a Trading Journal

In order to understand what you're doing right and what you need to improve on, a trading journal is essential.

This can be a simple notebook, Evernote or NakedMarkets.

Regardless of which method you use, just be sure that it works well for you and that it's simple enough that you can fill it out quickly. When a trading journal is too complex, you are less likely to fill it out and won't get the benefits.

Most trading journals have the basic information about each trade.

But also consider including these elements:

• MaxR
• Flash Cards
• Missed trades
• Trades you were considering taking, but didn't
• Profit/loss calculated in multiple of risk

Adding these elements to your journal can help you progress significantly faster than if you don't track them. Review your results weekly and take an honest look at how well you're trading.

Most aspiring traders I've seen don't fill out a trading journal.

This is like being an Olympic runner, but not recording your lap times.

You must track your results, in order to improve them.

Improve Your Trading

Once you've recorded your trades in your journal, now identify areas where you can improve.

Here are some staring points that you should explore:

• Should you give your stop losses more room?
• Are you cutting your winners short?
• Do you move your stop losses?
• Are you trading at the ideal times of day for your strategy?
• Should you be more selective about your trades?
• Are you afraid to take trades that would have worked?
• Do your entries differ from how you backtested your strategy?
• In hindsight, would you have still taken every trade you took?

Even a very simple trading journal will allow you to go back and review these questions.

Again, try to review each trade as objectively as possible and look for common mistakes or potential optimizations.

Upgrade Your Mindset

Last, but certainly not least, figure out how to your continuously upgrade your mindset.

Scientists used to believe that our brains could not be changed after a certain age.

More recent studies have proven that this is not true and we can form new brain connections and pathways throughout our lives, an ability called neuroplasticity.

So don't feel like you're stuck with what you currently have. It is possible to change how your mind works. You just have to be willing to put in the work to make those changes. 

Here are some mindset challenges that traders often face:

• Hesitation when taking a trade
• Discouragement during a drawdown
• Blaming others for trading losses
• Self-pity after a losing trade
• Not forgiving yourself after a mistake
• Revenge trading
• Getting greedy on a trade: either targeting too big of a take profit or not using stop loss

All traders have struggled with at least one of these issues, at some point in their careers. On deeper levels, most professional traders still face these challenges. They have just learned to control them better than amateur traders.

You can read these books and see that for yourself.

So how do you fix these issues?

Here's a simple exercise that you can do to start upgrading your mindset.

Human psychology is a very complex and nuanced topic, so I cannot give you all the answers in one short blog post.

But this can put you on the right track to understanding what will help you.

First, write down the behaviors that you feel are having a negative impact on your trading. Then focus on each one individually.

For example, let's say that the first item on your list is: Blaming others for your trading losses.

This might include:

• Blaming your broker for hunting your stops
• Blaming your family/partner for not allowing you the time to trade
• Blaming your job for not having enough time to trade
• Blaming an educator for not teaching you properly

Once you have your list, first ask yourself if the opposite could be true.

Is it remotely possible that your broker is NOT hunting your stops?

Could it be that you really do have enough time to trade, but you're spending too much time watching Netflix?

Take an honest look at the opposite of your belief.

What do you find?

Next, do the “Why Exercise.”

Keep asking yourself why, until you cannot ask come up with any more answers, or you come to an important realization.

In this example, you might say something like this:

• Why do I blame others for my trading losses?”
  • Because everyone is out to get me
• Why is everyone out to get me?
  • Because the world is a harsh place
• Why is the world a harsh place?
  • Because that's what my parents taught me
• Why did your parents teach you that the world is a harsh place?
  • Because that was their experience growing up during the war

Ah-ha!

So in this example your tendency to blame others, could actually be coming from your parent's experiences.

Not directly from your own experiences, or because people are intentionally sabotaging your trading.

Sometimes, just the realization of where your beliefs came from is enough to change some behaviors.

So that's where you should start.

However, there can be beliefs that are so deeply rooted, that they cannot be fixed through realization alone.

If you want to dig deeper into possible causes of these roadblocks, and how to fix them, read this post on advanced trading psychology.

Conclusion

So if you're struggling with figuring out how to be consistently profitable, start implementing the actions suggested in this post.

Remember that learning trading strategies is easy.

Developing the mental toughness to overcome drawdowns and internal doubt is the challenging part. This is the reason that most traders quit. 

But if you keep at it long enough, I believe that most people can figure it out.

The post How to Develop a Trader’s Mindset for Success appeared first on Trading Heroes.

Most traders don't understand the importance of trading psychology until they get so frustrated with system jumping, that they're forced to review other options. That's when they usually realize that trading psychology is the the real key to success in trading…or they quit altogether.

So if you want to save yourself some time (and headache), implement these 9 trading psychology tips.

I wish that I knew these secrets when I started.

1. Focus on How You Handle Losing Trades

Many traders don't want to even look at their losing trades.

But your losing trades are the key to your success in trading.

First, ask yourself how you feel about your losing trades. Do you avoid them like the plague? Do you get mad?

…or do you dig into them every week so you can learn something from them?

If you dig a little deeper into your psychology, do you take losing trades personally?

Is that because you're risking too much money? Or because you feel that it's an insult to your intelligence?

…or something else?

You will only start to improve when you can face your losing trades and learn from them.

Who knows, maybe you are being hard on yourself for no reason. Those losing trades might actually be high-quality trades, that just happened to lose. 

2. Ask Yourself Why You Are Trading

A lot of people get into trading to make a quick buck.

But as you probably know by now, trading is anything but that.

So ask yourself why you are really attracted to trading. 

I'm attracted to trading because I'm fascinated by the psychology it takes to succeed, and the creativity that it takes to develop new trading strategies.

If you think that you will make a fortune in trading overnight, you're in for a big surprise. There could be a fairly long road ahead.

You will only be able to stick with it, if you have a reason to keep going. 

So be honest with yourself.

Why are you really into trading.

Ask yourself why 6 times…

• Why do I want to become a successful trader? To be able to travel.
• Why do I want to travel? To create memories.
• Why do I want to create memories?
• Etc…

You might be surprised at the final answer. 

3. Evaluate How People Around You Influence Your Trading

As the saying goes…

“You are the average of the 5 people you spend the most time with.”

— Jim Rohn

So take a minute to consider the people you hang out with on a regular basis. They don't have to be traders, but it's probably a good idea to hang out with happy people, who are successful at what they do, and encourage others to be the best they can be.

When you hang out with fun, successful people, then it's very likely that you'll become one too. 

I'm not judging. Some people choose to complain and play the role of the victim and they have every right to feel that way. It might sound weird, but they do get something out of that state of being.

But since you found this website, you probably want to take control of your life and not just complain about it.

Therefore, take a good hard look at the people you spend the most time with.

If they aren't the type of person that you admire, then consider making some new friends.

You don't have to stop seeing these people. However, you may want to cut back on your time with them.

It may sound harsh, but it's how things work. If you aren't happy with your life now, then you need to make some changes. 

4. Can You Visualize Yourself as Successful?

You might think that all people can visualize success themselves as successful.

Not true.

If you can see yourself as successful, then consider yourself lucky.

Others have trouble visualizing success.

I was one of them. 

When you cannot visualize yourself as a successful person, then there's a deeply rooted belief that's blocking this ability to visualize. 

As I wrote about in this blog post, the source of this blockage is always trauma.

There's something that happened to you that is creating the limiting belief that you cannot succeed. Read that blog post if you want to learn more.

The list of possible things is too long to cover here, but that post does a good job of going through what I discovered about myself.

You can also consider using a Mind Movie to help you visualize your success.

5. Celebrate Your Wins

Occasionally, a trader will tell me: “I only made 3% last year.”

I usually do a double-take and think…”wait…what?!”

There are fund managers out there who make millions of dollars a year, but don't return that much for their fund.

So stop downplaying your results. 

Yes, if you are trading a $5,000 account and you make 3%, then that won't be enough to make a living.

But it's a great start. 

Over 90% of traders lose money and most blow out their accounts. So if you're profitable, it's just a matter of improving your skills. 

In most cultures in the world, we are taught to give away our power and sovereignty.

We are taught not to question doctors, professors, religious leaders and anyone with letters after their name. But more and more people are discovering that these professionals only know part of the picture.

People like you and me can have the power to figure things out on our own. We should certainly consult these professionals because they have a lot of knowledge, especially in certain specialized areas.

But we should think independently and have the final say in how we live our lives. 

The same thing goes for trading. Stop giving away your power by downplaying your results.

If you were profitable last year, isn't it possible that you can be more profitable this year?

Of course it is. 

6. Understand Your Negativity Bias

Most people in the world have a negativity bias.

They look for what could go wrong, before anything else.

…and this behavior is perfectly natural.

In previous times, we frequently had to defend ourselves against natural disasters, wild animal attacks and invaders from other tribes. There was a lot to be worried about.

Modern societies have shielded most of us from these threats nowadays. But the tendency to look for danger first, still exists in our collective subconscious.

So when we get into trading, we start telling ourselves things like:

• This trade probably won't work out
• I'll take my profit right now because the trade will probably go against me
• I think my broker is running my stops
• That trading system is a scam
• I need to get more education before I start trading
• …and on, and on…

Again, this is natural…and is also why so many traders fail. But now that you're aware of this, it's up to you to fix it.

The first step is awareness. Become aware if you naturally gravitate to a negative outcome or a positive one.

If you are naturally negative, start asking why. Is there a reason that you can pinpoint? Can you work on resolving that issue?

Of course, being too positive can be a downside too. It's overall better than being negative. But ask yourself if you're being overly optimistic, which can also cloud your judgement.

You probably won't be able to solve these issues right away. But stay aware and the answers will come.  

7. Habit and Process are More Important Than Trading Systems

New traders think that a trading strategy alone will make them rich.

This is a perfectly natural assumption.

Trading strategies are deceptively simple. Just follow a few rules and you're a billionaire.

…or so the theory goes. 

But there's so much more to it than that.

What's actually more important are your trading habits and processes.

When you develop a habit, you'll put in the consistent work that's required to:

• Test trading strategies
• Review trades in your trading journal
• Get more education

Building a habit isn't easy, but it's a requirement for success. I would recommend reading The Power of Habit to get started with building your positive habits. It gives you a step-by-step process to build a positive habit, or get rid of a negative one.

Speaking of process…

Having a process for improving your trading will help you:

• Figure out exactly where your trading is going wrong
• Test a strategy thoroughly before risking real money
• Understand if your psychology or strategy isn't working

When building processes, it's helps to map out your workflow on a sheet of paper. Create a flowchart that will help you understand how you'll manage each step in your trading.

Consider having a roadmap for your testing, live trading and journaling.

…or put them all together in the same flowchart. You can include things like:

• When you'll journal your trades
• A reminder to check your trading rules before entering a trade
• Your definition of a successful backtest
• How long you'll demo trade a strategy before you trade it live

8. What's Your Real Passion?

Do you have to be passionate about trading to succeed?

I believe that you do.

But if you aren't passionate about trading I also believe that you can use another passion to drive your desire to succeed in trading.

For example, let's say that you are passionate about cleaning up all of the plastic in the environment. Not a whole lot of money to be made in cleaning up plastic.

…as far as I know.

However, if you can learn trading and have that as your primary income, you can use that money to start doing something about all of the plastic in the environment. At the very least, you can start contributing more to organizations that work on the problem.

Either way, put some real passion behind your trading. Learning to trade is not easy and you'll need all the reasons you can get to keep going. 

9. Remove Unnecessary Stresses on Your Trading

Many people come to trading because they hate their job, or they want to make money quickly. So they put undue pressure on themselves by quitting their job, or trying to turn $100 into $500,000 in 6 months.

There are some endeavors where you can follow a certain plan and make money in a reasonably predictable amount of time.

Trading is not one of those businesses. 

Success in trading relies heavily on having the right mindset, a mindset that most of us aren't born with. 

So when you quit your job or try to make a crazy return on a small amount of money, you put unnecessary pressure on yourself and amplify the negative aspects of your innate psychology.

If you hate your job, consider changing jobs. Consider working odd jobs that don't require a lot of time or mental investment. 

This will take the pressure off your trading and allow you to progress faster. 

Conclusion

So those are 9 trading psychology secrets that I wish I knew when I first started trading. In the beginning, it was all about trading systems and making the most money possible.

Part of that is what I was taught and part of that was because I had blinders on.

If you want to speed up your development as a trader, learn from my mistakes. Prioritize trading psychology.

Trading systems are secondary.

Very secondary. 

The post 9 Trading Psychology Secrets I Wish I Knew Earlier appeared first on Trading Heroes.

Daily positive affirmations are short statements that help you become the trader (and person) you want to be.

Affirmations are a powerful tool that's used by successful people in business, pro sports and many other professions.

This post will show you how to create empowering positive trading affirmations of your own, or you can simply use one of the 19 affirmations listed at the bottom of this page. You will also learn how to use them to get the best possible results.

How Affirmations Work

Affirmations are conscious phrases that gradually overwrite your subconscious programming.

There are many external influences that have contributed to your positive and negative subconscious programming. As a result of these influences, there are things that you have been telling yourself over and over, for years.

These statements get deeply engrained in your subconscious and become part of your identity and reality.

Here are some positive examples:

• “I'm capable of anything.”
• “I always find a way to make it work.”
• “I have many wonderful friends.”
• “I always find the perfect teachers when I want to learn something.”

If you keep telling yourself these things over and over, you'll believe them.

…and they ultimately become your reality.

These programs have been running deep in our brains for our entire lives, and many times we don't even realize that they are there.

The only clue that there's a negative program running, is when we aren't getting what we want in life. This is what forces us to stop living on autopilot and be more mindful of what's going on.

Positive affirmations help us reverse our negative programming.

Before we get into the process of creating and using daily affirmations, remember that affirmations don't work instantly.

It took you years to create your negative programming. So it could take anywhere from several months to a couple of years to reverse that programming.

Be patient and consistent. 

3 Steps to Writing a Powerful Trading Affirmation

1. State it in the Present, as if it has Already Happened

Your mind cannot tell the difference between something you vividly imagine and something that has actually happened.

So take advantage of this fact. 

If you keep telling yourself that you're already a successful trader, you will feel successful on the inside.

That becomes your identity.

From there, your brain will find ways to align your internal feeling with your external reality.

But isn't this lying to yourself?

Not at all.

You have the ability to become a successful trader.

Unless someone has a major handicap, I believe that anyone can become successful at trading. I've seen people from all walks of life become consistently profitable traders.

Therefore, that ability is already inside you. It's up to you to choose to embrace that potential, or reject it. 

By creating positive affirmations, you choose to develop that ability and acknowledge your full potential. 

So when you write an affirmation, word it in the present, and as if it has already happened. You can see a few examples at the bottom of this post.

This will trigger your brain to see this as your new reality and make it easier to overcome the inevitable roadblocks along the way.

2. Be Positive, Short and Specific

Next, keep your affirmations short, stated in the positive and as specific as possible.

Why state it in the positive?

Your brain automatically removes the word “not” from most sentences. So the affirmation “I will not let my trades affect me emotionally,” registers in your brain as: “I will let my trades affect me emotionally.”

This is why it's so important to state your affirmations in the positive. 

When you keep them short, they are easy to remember and more likely to stick in your brain. Bonus points for creating affirmations that rhyme. That makes them even easier to remember.

Then make them as specific as possible.

A specific affirmation brings up a more vivid image in your mind and makes it more real. 

3. Include Action and Emotion

Finally, emotion is the key to making this all work. 

You can make almost anything happen, if you want it enough. This means putting all of your desire and passion behind it.

So include action and emotion words. 

It also helps to start with the phrase “I am” because that programs your identity.

Alright, enough with the theory. Here are some examples…

19 Positive Affirmations for Traders

1. “I am relaxing and having fun after I place trades.”

There can be a strong tendency to write a negative affirmation like: “I won't overtrade.” Using a positive affirmation puts you in the state of mind that you really want to be in, instead of stressing about overtrading.

2. “I am happily driving my Tesla Roadster on the Pacific Coast Highway, with the top down, at sunset.”

If you want a certain type of car, then painting a scene like this can help you imagine yourself in the car.

3. “I am excited to fill out my trading journal every week because it makes me a world-class trader.”

Make filling out your journal a positive event, not a chore.

4. “I am enjoying the view from the custom-built home that I designed with my wife.”

Think of what you want to create with your trading profits and how you will enjoy your creations.

5. “I am excited about following my trading rules because the profits give me freedom and security.”

Instead of beating yourself up about not following the rules, remind yourself what happens when you do.

6. “I am curiously watching the charts and only take the very best trade setups.”

This is a much better way of saying “Don't take bad trades.”

7. “I am enjoying the freedom, abundance and fun that comes with professional trading.”

After all, this is what you really want to get out of trading right?

8. “I am grateful that I effortlessly pay for every expense and luxury in my life.”

Instead of saying, “All of my debts are paid off,” an affirmation like this will help you be more relaxed with having abundance through trading.

9. “I am excited about learning new trading skills because they pay for my adventures.”

Education is very important in becoming a successful trader and this affirmation can remind you to keep learning.

10. “I am crying tears of joy when I receive thank you letters from the kids I help in Peru.”

Giving to a charity can be a great way to spend your profits. Connect to that emotion of helping others.

11. “I am extremely grateful for all of my profitable trades.”

This statement can help you focus on being grateful for what you have. Some traders may write something like: “I'll do my best to not execute bad trades.” Then of course, your brain excludes the “not” and you continue taking poor trades.

12. “I am lovingly supporting my children with trading and helping them develop to their fullest potential.”

What are your biggest reasons for trading? If one of your reasons is to give your kids a great life, then this is a fantastic affirmation to use.

13. “I am running 5 miles effortlessly because of my fun workout routine.”

Exercise is very important to successful trading, especially since we do a fair amount of sitting in front of the computer. Having an affirmation like this will remind you to get some exercise.

14. “I am confidently checking my bank account balance after my monthly deposit of $100,00 in trading profits.”

Make the number specific and make it clear that you withdraw profits on a regular basis.

15. “I am feeling completely in sync with the primary trend and effortlessly take trades in that direction.”

If you are a trend trader then this is a great affirmation to use.

16. “I am feeling extremely relaxed as I fly first class to my vacation in Jamaica.”

First class…Jamaica…very specific.

17. “I am attracting abundance into my life, in a way that's the best for everyone involved.”

There can be a tendency to think that abundance in your life means less for others. When you phrase the affirmation in this way, it removes this mental roadblock and helps you allow more prosperity to come into your life.

18. “I am energized by my exhilarating daily morning routine.”

Some people might create an affirmation that forces them to get out of bed in the morning to do their morning routine. But when you phrase it like this, you are more focused on the benefits…and less on the early wakeup.

19. “I am feeling centered and make great trading decisions because I meditate in the morning and evening.”

Meditation is another activity that can have a huge positive effect on your trading, but it can seem like a chore in the beginning. An affirmation like this can get you excited about doing it.

Take Action Now

Now it's your turn!

Create your own positive affirmations or use a few from this list. Regardless of which affirmations you use, write them down and keep them somewhere that you'll have easy access to them.

The key to success is to keep your list manageable. I would suggest starting with 3-5 affirmations and see how that feels. If you can manage that for a couple of weeks, then consider adding a few more. 

What you don't want to do is add a ton of affirmations, then get discouraged from doing your daily routine because there are so many affirmations.

Keep it simple.

Repeat your affirmations at least 2 times per day, every day. The most powerful time to recite your affirmations is just before you go to sleep. This is because while you are sleeping, your mind tends to replay the last thing you saw before you went to bed.  

Remember that this is a marathon and not a sprint. Keep doing this on a regular basis you will start to see changes over time.

If you use positive affirmations for awhile, and only see minimal changes, then consider going deeper with advanced trading psychology.

Do you have any awesome affirmations to add to the list? Share your affirmation in the comments below…

The post 19 Powerful Positive Affirmations for Traders appeared first on Trading Heroes.

So many charts…so little time. Trading can get hectic, learning to trade mindfully can help.

If you want to improve your trading performance, it's essential to examine all elements of your game.

Here are 5 commonly overlooked areas where you can increase your awareness and profits.

1. Double-Check Your Mental State Before Opening Your Charts

It can be easy to jump into the charts without considering your mindset.

After all, you've tested your strategies and executed thousands of trades before.

Why should this time be any different? 

The reality is that your mindset can vary dramatically from session to session. 

So before you even open your charting platform, take a minute to check in with how you're feeling…

• Did you just have an argument with someone?
• Or did you spend the day relaxing on the beach and you're ready to rock!

Just the awareness of your mental state can be enough to help you calm down and get into the right mindset for trading.

If you're the type of person who would like a quantitative measurement, I've found that the Inner Balance app/device from HeartMath is the easiest ways to measure if you're in the zone or not.

This device and mobile app measures your level of coherence. The higher your coherence, the more focused you are. 

Of course, you can move in and out of coherence at any time. But the more you practice, the better you will get at it.

The goal is to stay in a coherent state throughout the entire time you're trading.

Here's an example of an excellent coherence session that I had before opening my charts…

This is a great tool to help you trade mindfully. I highly recommend it.

2. Review Your Feelings Shortly After Entering a Trade

If you open a trade and don't look at it until it hits the profit target or stop loss, then you could be missing out on a valuable piece of information.

That piece of information is your intuition. 

Some traders have good intuition, others not so good. So figure out what works best for you.

Record your thoughts in your trading journal a few minutes after entering it. Do you feel as confident about it as when you took the trade?

Don't act on this information in the beginning. 

But over time, you might start to see some patterns emerging. 

Maybe your intuition about a trade turns out to be pretty good. If so, then you know that you should usually trust your intuition.

If your intuition tends to be wrong most of the time, then you should probably follow your trading plan exactly.

This is a subtle element of trading mindfully, but it can help a lot.

3. Be Aware of Your Attitude Towards Money

A sneaky roadblock that a lot of people run into is their subconscious aversion to money.

On the outside, they say that they want to fly first class and own an expensive luxury car.

But deep down…society, their parents and their peers have drilled into them that money is bad. 

• Movies usually portray rich people as greedy.
• Some spiritual leaders tell their followers that money is: “the root of all evil.”
• Parents tell their kids: “money doesn't grow on trees.”
• Co-workers hate the boss who tells them what to do and lives in a beautiful house

…and so on.

Of course, this is nonsense.

Money is neither good or bad.

It only magnifies who you really are.

You can use your money to build schools in developing countries. You can use your money to fund inventions that will change the world.

So be more mindful of your attitudes towards money. Keep a journal with you and write down your thoughts about money throughout the day. 

You might be surprised at what you discover. 

4. Be Mindful of Reoccurring Themes

Life Events

Are there certain themes that keep popping up in your life?

For example, do you tend to get into a lot of arguments?

Well, that could explain why you have so many losing trades. You may be placing more importance on being right, then being profitable.

In effect, you're arguing with the markets.

This is a sign that you should probably listen more in life…and in trading.

Your Dreams

Another area that you can find common theme is in your dreams.

Everyone dreams.

Not everyone remembers their dreams. 

If you think that you don't dream, you simply aren't making a conscious effort to remember your dreams. Give it an honest try for a couple of weeks and you'll get the hang of it.

You probably won't remember your dreams every night.

But you will remember them a lot more often.

Keep a journal by your bed and be ready to record your dreams as soon as you awake. 

When I made a serious effort to remember my dreams, I discovered my primary mental roadblock was I believed that most things in my life would not work out.

Wow, imagine how limiting that belief can be!

It was amazing how often that theme came up.

Once I knew that, I was able to explore ways to fix it. But if I never had that realization, I might still be stuck in a cycle of self sabotage.

After you master dream recall, you can start to dive into lucid dreaming.

That's when the fun really starts

5. Maintain an Objective Mindset While Reviewing Trades

It can be easy to get down on yourself when you're on a losing streak. That's especially true when it comes time to review your trading journal.

Now I'm not saying that it's easy to keep an objective mindset when you are losing.

It can be very challenging.

But like with anything else, practice builds the skill.

Start from where you are, do your best…and go from there. 

When you're on a losing streak, just opening your trading journal can be painful. The first step to facing your trading losses is to consider the following…

1. Even if it was a poor trade, you can learn something from it. What's done is done. Find a way to prevent it next time and move on.
2. Upon closer review, you may find that you're actually trading quite well, but you simply hit a normal drawdown.

Also ask yourself if you're doing these two things…

1. Are you attaching too much of your personal identity to your trading results? If so, you're trading from an ego-centered mindset. Your ego wants to be right. Your ego wants to be the big-swinging-dick trader. This never ends well. Quiet your mind and learn to detach yourself from your trading results.
2. Are you trading with too much risk? If you're losing an uncomfortable amount of money, it's time to scale back or even downshift to a demo account until you can get your performance figured out.

Reviewing your trades is a perfect time to reflect on how you can take your performance to the next level.

Set a time in your calendar to do it regularly.  

Final Thoughts on Ways to Trade Mindfully

So those are 5 ways to upgrade your psychology and trade mindfully.

Learning trading strategies is easy. 

Mastering them is the hard part. 

But if you're conscious of every element of your trading process and work to make small improvements every day, those improvements can compound.

…and you know what they say about compounding.

What are some ways that you've upgraded your trading mindset. Share your experience in the comments below…

The post Trade Mindfully: 5 Commonly Overlooked Ways to be More Mindful appeared first on Trading Heroes.

Vision boards have never worked for me.

I'm not saying that they don't work at all…they certainly work for some people.

It's all about finding what works best with your unique personality…just like with trading strategies.

But if you've tried making vision boards in the past and they didn't work for you, then I'll show you what works for me.

This is a fun form of goal setting and can help you improve your trading and your life. 

Why Vision Boards Don't Work For Me

I thought about this for awhile and I realized that vision boards don't work for me because they are one-dimensional. They don't engage enough of my senses for me to get really excited.

I found that after about of week of posting a vision board, it would fade into the background.

Even when I consciously spent time looking at it, I didn't have the same level of emotion that I had when I first posted the images.

So every vision board that I created eventually got thrown out.

Why Mind Movies are More Effective

Mind Movies are more effective because they engage more of my senses.

They can include:

• Music
• Dynamic pictures
• Videos
• Moving Text

This leads to a more emotional response to the movie and gets me excited about achieving the goals.

3 Examples of How They Worked For Me

Now that sounds great in theory.

But it's all about tangible results.

So let's take a look at a few recent concrete examples of how they worked for me.

Finding a Profitable Trading Strategy

Like most traders, I've learned many, many trading strategies over the years.

You probably have too.

I was looking to add another strategy to my portfolio of strategies and I wanted it to be a trend following strategy. So I put that into my movie.

At that point, I was already testing other trend trading strategies, but they weren't profitable in backtesting.

However, within a month, I was drawn to a trend trading strategy that tested very well and is currently in Beta Testing.

Overcoming My Mental Roadblocks

I've done a lot of work on my psychology over the years, but there were still some stubborn bugs that I just couldn't shake. I talk about them in detail here.

So at the beginning of this year, I put in my movie that I wanted to heal the traumas that are holding me back in life.

As of last month, I have resolved the issues that I wanted to resolve and I feel like a brand new person. 

Of course, there's always room for improvement. But this year has been a landmark year for me and I feel that it's because I focused on the specific ways that I wanted to change.

Manifesting an iPhone XR

I recently noticed that my phone was getting slow. So put in my mind movie that I enjoy using my new iPhone XR.

But I wanted it to come as a result of income that I wasn't expecting.

Within a month of creating the Mind Movie, one of my partners paid me with an amount that paid for the new phone, with a couple hundred bucks to spare.

This partner doesn't pay me regularly, only when I refer sales.

So that was a nice surprise.

Here's the phone…

More Proof That It Works

But I'm not the only one that this works for. Here are a few more examples of how Mind Movies have worked for others.

From Cancer Survivor to Triathlete

She was told that she would never be able to be an athlete again. But she is now training for a sprint triathlon.

Achieved “Out There” Goals

This guy got results with a stock photo.

Manifesting a $2 Bill

If you don't believe that this stuff works, start small. This woman started by wanting to manifest a $2 bill.

Here's what happened…

How to Make a Movie

You simply login to the Mind Movies website and start creating movies.

They have a ton of stock images, movies, affirmations and music that you can use. You can also upload your own or search for YouTube videos to use.

The interface is easy to use and you just drag and drop the elements that you want to add to your movies. You can add text and transitions to each scene and the software will automatically make static pictures more dynamic.

If there's a downside, the interface feels a little clunky and looks dated. But once you get the hang of it, the software works well.

When you are done, you send it to processing. That will create the movie and you can download it when it's finished.

They also give you the option to upload it to YouTube, so you can share it with others.

The best part is that you get this software for a one-time payment. No monthly fees.

Conclusion

Are Mind Movies and vision boards magic?

It can certainly feel like it.

I believe that you do attract what you focus your mind on.

But Mind Movies are also very practical…

They help you do a combination of things:

1. Set concrete goals that you can work on achieving
2. Keep you aware of opportunities in your environment
3. Get you excited to take action on your dreams

Setting goals is essential for success.

But you can't just set a goal and forget about it. You have to review your goals on a regular basis and Mind Movies are a fun and energizing way to do it.

Learn more about Mind Movies here.

Disclaimer: Some links on this page are affiliate links. We do make a commission if you purchase through these links, but it does not cost you anything extra and we only promote products and services that we wholeheartedly believe in. TradingHeroes.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

The post Throw Away Your Vision Board and Use This Instead appeared first on Trading Heroes.

This is one of the most common reasons that people fail in trading. Unfortunately, it's also a natural human response.

I've been studying trading psychology for over 15 years, and I'm going to share with you what revenge trading is, what causes it, and the best ways that I've found to stop it.

Revenge trading is an emotional response to a losing trade or a series of losing trades. Traders that engage in revenge trading will try to make up their losses quickly. This leads to even larger losses, and can result in losing all of the money in their trading account. 

Some people think that only big losses lead to revenge trading.

This is not true. 

Even the smallest loss can trigger this behavior.

Here's why…

The 8 Causes of Revenge Trading

It can be hard for some traders to keep themselves from taking more trades, when they know that they should stop.

This is because trading can evoke some of our deepest, darkest, most primal emotions.

Revenge trading is caused by a loss of emotional control. There are 8 underlying mindsets that will trigger an emotional reaction that can lead to revenge trading. 

1. Anger

Some people have a tendency to get mad easily.

This is a strong innate personality trait for some, and for others, it's a product of their environment.

When people are stressed or tired, it's easy to get mad at the smallest things.

That causes them lash out at the market, in attempt to “get even.”

2. Greed

I think it's pretty safe to say that almost everyone gets into trading because they want to get rich quickly.

Successful traders eventually figure out that you can get rich over time.

But there's really no way to get rich quickly.

When traders try to make money too quickly, they want to get revenge for losing trades, instead of letting a positive edge work itself out over time.

3. Poverty Mindset

When you feel like you're poor, you'll have the need to “catch up” to all the time.

In order to do this, many traders take way more risk than is reasonable.

This leads to trying to make up for losses by stubbornly sticking to trading ideas that aren't working.

4. Fear

There are 2 types of fear that leads to revenge trading.

First, there is the fear of missing out.

To get revenge for a missed trade, some traders enter trades way too late and usually end up with a losing trade.

The other type is the fear of losing gains.

Traders have the tendency to close trades early to protect gains.

Sometimes that works out for the best. But many times the trade takes off, leaving the trader to regret the missed gains.

In order to get revenge for those missed losses, traders can take another trade on the same setup, or double down on the next setup.

5. Shame

Some traders have a lot of pride and don't want to experience the shame of telling their friends and family that they are losing money trading.

So in order to make up for their losses, they will take more risk on every successive trade, to try to make up for their losses.

Of course, that only leads to bigger losses and usually ends in a loss of the entire account.

6. Lack of Awareness

Have you ever started driving in your car, then wondered how you ended up at a destination?

I've certainly done that a few times.

Obviously, the reason why that happened was because I was thinking about something else and was not aware of where I was driving.

The same thing can happen in trading.

When traders don't track their losses and aren't aware of their emotional states, then they won't realize when they aren't following their trading rules and they are revenge trading.

7. Overconfidence

On the surface, trading looks really easy.

Just click a few buttons and make some money.

You don't even have to get out of bed.

Of course it's not that simple. 

But some new traders think that it is.

They have the false belief that all they need to do is follow a magic trading strategy on YouTube and they will start making money.

When someone thinks that something is easier than it actually is, they will have a skewed perception of the risk and will usually try to make everything back on the next trade.

8. Not Knowing the Probabilities of a Trading Strategy

Finally, many new traders do not know how their trading strategy should perform, or even if it has an edge or not.

So when they lose 2 trades in a row, they freak out and double down on their next trade to make it back.

Some very profitable trading strategies have a win rate that's less than 40%.

But if a trader doesn't know that, they have a significantly higher risk of blowing out their account if they try to make their losses back on a failed trade, instead of waiting for the next trade.

How to Stop Revenge Trading

Now that you know the causes of revenge trading, let's look at practical ways to stop yourself from doing it.

There are three categories of actions that you need to take to stop revenge trading. You have to understand why you do it, be aware of the events that lead up to it, and learn ways to stabilize your emotional state.

Some people think that it's as simple as telling yourself: “Just stop doing it.”

But nothing could be further from the truth. 

Revenge trading is a very strong impulse for many people, so don't get discouraged if you cannot change your behavior right away.

Be patient with yourself and strive to get a little better during every trading session.

It's going to take as long as it takes for you, so don't compare yourself to others. 

Keep at it and if you're honest with yourself, you'll start to see improvements.

Here are 9 practical strategies that you can implement right now to prevent revenge trading.

1. Take a Break or Trade Smaller Until You Figure Things Out

If you think that you might start to revenge trade or you might already be revenge trading, the solution is to stop trading. 

Close all of your positions, if necessary.

This pause will allow you to step back and see your trading more objectively.

If you don't want to stop trading altogether, then trade much smaller positions until you get back on track. 

For example, let's say that you currently risk 2% per trade. You might want to temporarily scale that back to 0.5% risk per trade.

Trading a smaller size will allow you to stay in touch with the movements of market, while reducing the chance that you'll do significant damage to your account.

Using nano lots is a great way to scale down your Forex trading and take exactly the same amount of risk on every trade.

If you trade futures, you can scale down to mini contracts.

Trade fewer shares of stock.

Once you're confident that you won't revenge trade, you can go back to your normal position size.

2. Develop More Awareness While Trading

All change starts with awareness of the issue. 

The first step to changing any behavior is to be aware of what you're doing. But this is often easier said than done.

This is because there is usually something that sets you off…a trigger.

Once that trigger fires, it sets off a chain reaction of actions and emotions that are currently beyond your control.

You might not even be conscious of what you're doing until it's too late. 

That's what makes emotional trading so dangerous.

When you finally regain awareness, it's usually too late because you've already lost a ton of money.

In the case of revenge trading, the trigger could be a bad day at the office, losing a trade when you're tired, or a loss on a certain stock or currency pair.

So get in the habit of keeping a journal of your thoughts and emotions while you're trading.

It helps to journal throughout the day, so you can get an idea of what kind of things lead up to a revenge trading session.

Use a paper notebook or an app on your phone, whatever works for you.

If you don't like to write, record your voice.

The specific tool you use doesn't matter.

Record your thoughts in a way that's easiest for you and review them later.

3. Review Your Strategy, Execution and Market Conditions

Ask yourself 3 questions:

1. Is your trading strategy performing within what is expected from your backtesting and/or demo trading data?
2. Are you following your trading plan and trading in a peak mental state?
3. Is there unusual market behavior and/or news?

An unusually high number of losses, due to one or more of these factors, could lead to revenge trading. 

So review these 3 areas every week.

When you do, you won't be caught off guard by a high number of losses and be tempted to keep trading when you should really stop.

4. Implement the 2-Strikes Rule

I have a simple rule called the 2-Strikes Rule that guarantees that I will never blow out my account due to revenge trading.

I don't allow myself to take more than 2 losing trades on the same trading idea.

This rule has kept me out of a lot of trouble and it can help you too.

When you set limits like this beforehand, you are much more likely to follow them, even when your emotions are running high.

You can use whatever number makes sense to you.

But I've found that more than 2 to 3 shots at a trading idea does not increase my probability of success.

In psychology, there is a fancy term called setting boundaries.

You set boundaries in your everyday life and that determines what you will and won't tolerate.

Set a maximum number of losses on each trading idea and you will stop yourself from chasing trades and going broke. 

5. Increase Your Heart Coherence

Heart coherence has been proven to help people regulate their emotional state and make better decisions.

A high HRV means that you are in a state of high coherence. In this state, you are more likely to follow your trading plan.

Luckily, this is easy to measure.

There are many devices that will help you do this.

I wouldn't recommend using one of these devices while you're trading because it can be distracting.

But consider using one of these devices before you start trading, to ensure that you're in a solid mental state before you begin.

I use the HeartMath InnerBalance device. It pairs with an app on my phone and gives me feedback on my heart coherence.

Five minutes is usually enough for me to get into a high state of coherence.

It's like a reset button that will help you clear any negative emotions that may have come up prior to your trading session.

6. Identify Your Cue and Reward

In his book The Power of Habit, Charles Duhigg cites several examples of how powerful habits are and why they are so difficult to change.

I would highly recommend reading this book if you want to understand the inner workings of habits, how they are formed and how they can be changed.

However, if you want to get the short version, then this infographic will help. It's a complete version of the image above.

Based on his research, this is the process that Duhigg recommends for changing a habit.

The bottom line is that our habits (even our bad ones) give us some sort of reward.

So if you can figure out what that reward is for your negative behavior (revenge trading), you can figure out how to get the same reward, but with positive behavior. 

7. Implement Behavior Conditioning

Studies have shown that kids respond better to positive reinforcement, but adults are generally more responsive to negative punishment.

Of course, the type of reinforcement that works the best will depend on the person and the situation.

So experiment with the 4 methods of conditioning:

• Positive reinforcement
• Positive punishment
• Negative reinforcement
• Negative punishment

Once you understand which ones work best for you, then use them every chance you can, to keep yourself from revenge trading.

In my experience, I've found that the negative methods often work well in the short term, but positive methods tend to work best in the long run.

But again, experiment with both and see what you respond to.

8. Use a Positive Market Metaphor

Get rid of market metaphors that don't serve you.

Multiple studies have shown that metaphors can significantly color the way we see a situation.

So don't personify the market as a bunch of Gordon Gekkos or crooked brokers.

If you see the market as a battleground or place where you could “die,” then that's not a healthy metaphor either.

See the market as a network of regular people who provide a tremendous opportunity to make a great living from anywhere in the world.

Seek out cool traders and brokers who care.

Think of trading as the coolest club in the world, or the Olympic Games of Finance.

The more you can see the market as a positive place, that will reduce the likelihood that you will lash out at an “evil” market.

9. Leverage the Law of Resonance

Everything in the universe is made up of energy.

We tend to resonate with the type of energy that is in our immediate environment.

Here's an excellent illustration of this concept:

So be very aware of your environment and the people you hang out with.

• Do these people get angry easily?
• Do you watch shows/movies with a lot of violence?
• Is your home disorganized and distracting?

These influences could be triggering your revenge trading.

Do your best to hang out with positive people.

Turn off the news and consider what you're watching on Netflix very carefully.

I stopped watching the news in 2003 and it's one of the best things I've ever done for myself.

After some reflection, I also realized that Netflix is a waste of time and cancelled my subscription.

Carry a $100 bill to help yourself feel more abundant.

Keep your trading desk clean and organized.

These are all ways that you can start to raise the vibration of your surroundings and make you less likely to revenge trade.

Video Tutorial

If you prefer a video tutorial, here's a summary of the most important concepts mentioned above.

Frequently Asked Questions

Now let's wrap up this article with answers to a few frequently asked questions related to revenge trading.

1. How Do You Remove Emotions From Trading?

This is a common question that new traders ask when learning about revenge trading. But the answer isn't what they expect.

Traders cannot completely remove emotions from trading because they are humans, not robots. Therefore, the goal of every trader should be to minimize the negative impact that emotions have on their trading. 

The best way to do this is to demo trade and/or backtest your trading strategy extensively. 

When you've practiced your trading strategy over a significant number of trades, you will know your probability of winning.

Once you know this, you won't freak when you have a few losing trades in a row.

On the flip side, you also won't get too excited when you're winning either.

This will limit your emotional swings and make it much less likely that you'll revenge trade.

2. How Do You Avoid FOMO Trading?

The fear of missing out stems from the belief that there won't be any more trading opportunities in a market.

So a trader has to take THIS opportunity, before it gets away.

Of course, this is ridiculous because there are opportunities to make money every day.

The only thing that is preventing traders from taking advantage of these opportunities is a lack of skill in identifying them.

Therefore, the solution to FOMO trading is to learn different trading strategies across multiple markets. 

When you do this, you'll get to a point where you'll have too many opportunities and you'll have to be selective. 

3. How Do You Deal With Greed in Trading?

Greed is caused by the unrealistic expectation of a future result.

In trading, that means you think you're going to make way more than is realistic on a trade.

So again, the solution is backtesting and/or demo trading.

When you understand the parameters of your trading strategy, you'll know when to take your profits.

If you don't have that data, it can be very easy to hang on to a trade for way to long and see your profits disappear.

When that happens, it can be easy to try to make up for that loss by entering more trades.

Final Thoughts on Revenge Trading

If you find yourself giving back all of your profits, or you don't understand why you lost so much money last month, then be aware of your triggers.

Keep a trading journal to figure out where you lost emotional control.

I consider revenge trading the most dangerous psychological state in trading because it can end in a zero account balance very quickly.

If you are prone to this behavior, first acknowledge that you have an issue.

Then take action to fix it.

You got this.

The post What is Revenge Trading? Definition, Causes and Solutions appeared first on Trading Heroes.

It's well known that over 90% of traders fail at trading.

But why?

In my experience with learning to trade, working at a hedge fund and consulting with traders since 2007, the primary reasons that traders fail are a lack of a proven trading strategy, weak psychology and no accountability. 

But there isn't just one reason that an individual isn't finding success, it's always a combination of reasons.

Here's a complete list and breakdown of all of the reasons that a large majority of people who start in trading never achieve their goals.

Lack of Education and Knowledge

Trading without a solid understanding of trading strategies, risk management, trading platforms and psychology often leads to failure.

The weird thing about trading is that it seems easy, so people don't take it seriously. 

A common misconception among aspiring traders is that they can learn a trading strategy in a weekend and they will become successful.

They also think that they can just watch a YouTube video or buy one course and that's all they need.

The questions I get on my YouTube channel surprise me sometimes.

Some traders don't take the time to do some basic research on how trading works and they jump straight into live trading.

In reality, trading is one of the toughest professions in the world. 

So traders need to study as much as possible and find out what really works before risking real money.

This means reading trading books, watching many YouTube videos and taking trading courses.

Not Backtesting a Trading Strategy

Education and knowledge are not enough.

I've met many traders who know a lot about trading.

But it's a purely academic knowledge. 

They never take the time to backtest their trading strategies, so they jump from system to system because they don't understand the metrics of each strategy.

More importantly, many of them don't even know if the strategy actually has an edge or not!

That's like buying a home and not getting a home inspection.

A home inspector will usually know much more about what could go wrong with a home than the average homebuyer, who maybe buys 3 homes in their lifetime.

Isn't it a good idea to know what's wrong with the largest purchase you'll make in your life?

Of course.

Same thing goes for a trading strategy.

If a trader is going to risk their money and wants to make a consistent income from trading, it's vital that they know that the trading strategy actually works. 

Backtesting a strategy also gives a trader the confidence to take real money trades.

Once a trader knows that their strategy has an edge, what their max drawdown is, and they have a set trading plan, they have a support system to rely on.

The final benefit of backtesting is practice.

After seeing many historical trades, a trader has experienced many variations of their entries and exits and will get better at spotting opportunities.

Like with any other skill, practice makes (almost) perfect.

Poor Trading Psychology

As I mentioned in the beginning, lot of aspiring traders believe that all they need is a profitable trading strategy to succeed in trading.

Nothing could be further from the truth.

In my experience, trading psychology is the most important factor in becoming a successful trader. 

When a trader has the right mindset, they are able to overcome setbacks, find the best trading strategies for them and adapt to changing market conditions.

Without the right mindset, a trader will fall back on their default programming, which is almost always not well-suited for trading.

Humans are not built to be traders.

Our innate programming makes us fearful and greedy at exactly the wrong times.

If a trader is willing to work on his or her mindset, that will pay the biggest dividends in performance improvements.

I've written many articles on trading psychology, but I've personally realized the greatest gains by going beyond traditional methods.

The best tool in a trader's toolbox for improving their mindset is a trading journal.

They need to record their thoughts and emotions so they can reflect on them later and figure out ways to improve.

My favorite trading psychology book is Trading in the Zone, but these books have helped me a lot too.

Poor Risk Management

The next most important thing in trading is risk management. 

Failure to manage risk effectively can result in significant losses.

Traders who over-leverage their positions or move their stop loss orders often suffer large drawdowns that can wipe out their entire account.

Solid risk management can take a trading strategy from decent to super profitable, just by tweaking a few settings.

Many traders overlook this part of their strategy and trade a strategy as they learned it, or they try to make it more profitable by increasing the risk.

Those can be recipes for disaster.

Focusing on risk management can lead to some of the biggest gains in performance, so it should be studied carefully. 

Emotional Decision Making

Emotional responses such as fear, greed, and overconfidence can cloud judgment and lead to impulsive trading decisions.

Traders can never completely eliminate emotions, so they need to learn to mitigate negative ones and work with positive ones to find success.

Meditating before a trading session can help a trader calm down and get into the right mindset to trade.

But learning to manage one's emotions goes beyond just what they do before they trade.

If I had to summarize what it takes to control our emotions, it all comes down to detachment. 

Many times, people become too attached to an outcome and that's what makes them emotional.

People can get too attached to outcomes that really have nothing to do with them, like who wins the World Cup or who wins some game show.

This often stems from not having their own identity and overcompensating by identifying with an external event or organization.

When traders can detach from the outcome of a trade, and their identity as a “Trader,” then they are less likely to become emotional and make bad decisions. 

Lack of Discipline

Consistency is crucial to trading success.

Not necessarily consistent profits, but consistent actions.

The right consistent actions are what lead to consistent profits. 

Traders who deviate from their trading strategies, abandon their trading plans, or fail to adhere to their risk management rules are very likely to experience failure.

Some traders have discipline naturally or by training.

Traders who do not have it have to practice it to attain the skill.

There's no shortcut or hack here, it's something that has to be worked on daily.

Failure to Adapt

The world is dynamic and constantly changing.

Traders who fail to adapt to new market conditions, evolving strategies, or technological advancements may struggle to remain profitable.

We all have that family member who tells the same story over and over.

They are stuck in a time loop, often reliving their glory days.

You'll notice that they are usually also very set in their ways and cannot adapt to new situations and ways of thinking.

That's the kiss of death for traders.

For example, imagine if some traders were still drawing charts by hand.

They would be wasting time by not using computers to speed up their analysis process.

On top of that, everyone who is using computers is coming up with strategies that could potentially make hand-drawer's strategies obsolete.

So while it's not helpful to keep jumping to the next new thing, it's essential to keep up with new advancements and changing market conditions. 

Overtrading

Trading excessively, either by taking too many positions or trading with too large a position size, can increase transaction costs and destroy profits.

There's a misconception among aspiring traders that more trades will equal more profits.

In reality, it's usually the opposite.

A few well selected trades will always yield better results than a ton of mediocre or poorly chosen trades. 

Other reasons for overtrading are:

• Overconfidence: Some traders may overestimate their abilities or underestimate market risks, leading them to believe that they can quickly recover losses through aggressive trading.
• FOMO (Fear of Missing Out): Fear of missing out on potential profit opportunities can cause traders to enter positions hastily without proper analysis or consideration of risk.
• Trading too many markets: If a trader tracks too many markets, they can get “shiny object syndrome” and take every single signal in every market they track. It's important to practice discretion here and be very selective so they don't have too much open risk and too many correlated trades.

An interesting study also found that men tend to overtrade more than women, and single men overtrade more than married men.

Revenge Trading

There's a tendency for traders to treat the market like another person. 

Of course, that's ridiculous because the market is collection of many people from around the world.

But that's just what humans do.

And that's why traders fail.

So if a trader sees the market as a person, they can easily feel like that person has wronged them by causing them to lose money.

When that happens, some traders will want to get back at that “person” for their losses and they will take irrational trades.

Traders who are prone to thoughts of revenge have to guard against this bias by resolving their need to get revenge.

Understanding why they need to get revenge all the time is the first step to preventing this behavior. 

Lottery Bias

Many traders treat trading like gambling.

They think that they will hit one big trade and that will solve all of their problems. 

A common justification that I've heard for this is that a big win will erase all of their losses and finally allow them to trade “properly.”

What these traders fail to realize is that big wins require big risks and it only takes a few big risks to lose an entire account.

Another way that traders give into the lottery bias is by setting their stop losses too tight.

They think that they can set a tiny stop loss and make a big gain.

Sure, there are some traders who can successfully use a small stop loss.

But those are day traders or scalpers and most people are not compatible with a short-term trading method.

So traders have to evaluate if they are playing the lottery, or if they truly understand the market and are placing their trades accordingly.

Lack of Patience

Successful trading requires patience to wait for high-probability trading setups and backtested exits.

Impatient traders may enter trades prematurely or exit them too soon, missing out on potential profits.

Even if a trader has thoroughly backtested a strategy, there is always the temptation to take profits early.

The solution here is for a trader to go back to their backtesting results.

They should redo the test, but take profits early or enter trades that are not part of their trading plan.

When the results are compared, the course of action is usually very clear.

Wait for the best setups and see the trade through to the profit target.

Deviating from the plan will only cost the trader money.

Failure to Accept Losses

Losing trades are inevitable in trading.

There's no such thing as a no loss trading strategy.

Traders who refuse to accept losses and hold onto losing positions in the hope that they will turn profitable often incur larger losses.

Successful trading is all about:

• Having small losses and bigger winners
• Having small losses and small gains, but a high win rate

But not accepting a loss will usually lead to losses that are bigger than winners and make it impossible to make a net profit over time.

Inadequate Capitalization

Trading with insufficient capital can limit trading opportunities and increase the risk of margin calls or account blowouts.

Traders need to have adequate capitalization to withstand market fluctuations and cover losses.

Luckily, it has become much easier to get started in trading with a small amount of money.

In Forex, traders can get started with as little as $500 by trading nano lots.

But in other markets like futures, traders need a minimum of $25,000 to even get started.

So traders must understand the capitalization requirements of the markets they are trading if they want to have any chance of success.

On top of that, a trader cannot expect to make a full-time living with the minimum capital requirements.

For example, in Forex there's no way that a trader can make a living with a $500 account.

Same goes with a $25,000 futures account.

They have to practice good risk management and have a solid trading plan to build a small account to point that it will produce a significant income.

Lack of Understanding of Market Dynamics

Much like individual people, each market has its own personality.

There are different market dynamics, transaction structures and trader psychology that make each market unique. 

So a trader cannot expect to use the same strategies successfully in one market and have those strategies work equally well in another market.

Traders must take the time to learn the nuances of each market and what works best in that market.

Lack of Accountability

Traders who fail to take responsibility for their trading decisions will not learn from their mistakes and improve their performance.

In all fairness, it's easier to be accountable to others than yourself.

Based on personal experience, I understand this very well.

Therefore, I've also found that it helps to have an accountability buddy or group that can give me an external perspective on my trading behavior.

An honest reflection of what I'm doing has helped me realize things that I didn't see or was avoiding.

Beyond that however, traders have to take radical responsibility for all of their results.

That means no more blaming the market, the broker or the computer for losses.

Even if a situation seems to be out of a trader's control, that trader is still responsible for having a backup plan or accounting for the unexpected.

Final Thoughts on Why Traders Fail

So those are all of the reasons why most traders fail at trading.

Each trader will face his or her own combination of the challenges above.

But proper awareness, time for reflection and a good trading journal will help any trader make the necessary improvements.

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