10 Steps to Better Trade Psychology

The correct psychology and mindset are the first step towards productive trading. They don’t ensure you’re going to be a productive and efficient trader but the wrong mentality almost ensures a loss.

So here are ten steps that will lead you to the correct trader mindset, which improves the likelihood of success:

  1. Stop searching for tips and trades produced by others and develop your own system. You don’t usually know other trades exact stop-loss points, position entry, and time frame, so it’s hard to properly follow somebody else in a volatile market.
  2. You should be able to sort all available data and focus on building your own style that suits your own risk tolerance and expectations of return.
  3. You have to go into investing with a reasonable expectation of what monetary risk you will take and what your equity curve can look like. All profitable trading systems and strategies have drawdowns as market dynamics change from trending to range-bound and back.
  4. If you have a legitimate trading system entry signal, you have to take it. You can not afford to miss a big win, but you can afford to lose a little.
  5. With every trade, you must consider all options and be ready to leave the trade if it is proven to be wrong regardless of your belief or how much you trust your own forecast.
  6. On every trade entrance, you must accept the risk of failure and only execute if the potential reward is worth taking the risk of losing.
  7. You need to recognize that sometimes market action may seem random, so you’ve got to trade a system that can filter out volatility and false movements and trade the macro trend.
  8. In any single trade, you must recognize the uncertainty of the market and reflect on the long-term probability of your edge beating the market in the long term.
  9. You need to manage the temptation to let the winners run, but you also need an exit strategy to lock in gains while they’re still there.
  10. Concentrate on your trades, consistency and possible market opportunities to profit. When you keep a positive attitude you help manage your stress levels.

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