The Mental Aspects of Trading (Part 3)

02/27/2008 12:00 am EST

Focus:

Linda Raschke

President, LBRGroup, Inc.

Trading is a great business because the markets close at the end of the day (at least some of them). This gives you a zero point from which to begin the next day-a clean slate. Each day is a new day. Forget about how you did the week before. What counts is how you do today!

Sometimes what will happen during the day comes down to knowing yourself. Are you relaxed or distracted? Are you prepared or not? If you can't trade that day, don't trade, and don't overanalyze the reasons why or why not! Is psychoanalyzing your childhood going to help your trading? Nonsense!

The third important ingredient for achieving peak performance is attitude. Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant two steps forward and two steps back. Every professional has gone through long, flat times. Slumps are inevitable, for it's impossible to stay on top of your game 100% of the time. Once you've dug yourself out of a hole, no matter how long it takes, you know that you can do it again. If you've done something once, it is a repeatable act. That knowledge is a powerful weapon and can make you a much stronger trader.

Good trades don't always work out. A good trade is one that has the probabilities in its favor, but that doesn't mean that it will always work out. People who have a background in game theory understand this well. The statistics are only meaningful when looking at a string of numbers. For example, in professional football, not every play is going to gain yardage. What percentage of games do you need to win in order to make the playoffs? It's a number much smaller than most of us are willing to accept in our own win/loss ratios!

Part 1 |  Part 2  |  Part 4

by Linda Bradford Raschke, LBRGroup.com

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