Three Tips for Developing Mental Toughness in Trading

07/15/2010 12:01 am EST


In an earlier article for, I discussed mental toughness as a key trading psychology skill drawing from sport and how two tennis champions used it in their respective games. You can read that article here. This article is a follow up with tips on how to develop mental toughness in your own trading.

In trading, mental toughness is all about doing what needs to be done in order to trade well. It is taking the actions necessary to keep yourself in the trading game. When a trader makes a mistake or suffers a loss, however, it can often mark the beginning of a downward spiral. Things can quickly go from bad to worse. Feeling pressure, more mistakes may be made, and perhaps more losses occur. Mentally, traders lose focus and take themselves “out of the game.” Let’s understand how this might happen.

How Mental Chatter, Stress, and Emotions Take You Out of the Trading Game

When a trader makes a mistake or suffers a loss, the natural tendency is to go inside and begin to focus on what the mind is saying, on bodily sensations and feelings. This is nearly automatic.

After a loss, for example, you might hear your mind say something like, “Another loss! It’s the same old thing. I’m never going to be successful in trading. I’m a loser.” Pretty depressing, isn’t it? How can a trader trade well when buying into such thoughts? Believing such mental chatter takes you right out of the trading game.

Such self-talk will also tend to produce stress and unwanted emotions. A loss is viewed as a threat, and our body responds with tight muscles, a queasy stomach, or sweaty palms. Emotions such as anxiety or fear are triggered, and these seem to confirm what the mind is saying. Note carefully that attention has shifted off the market to the trader’s internal experiences. Making sound trading decisions now becomes difficult.

This focus on downbeat internal experiences takes attention off the market. To trade well, focus needs to be external, concentrating on the market and finding the next choice trade. No one can trade well when their attention is captured by what their mind is saying and how they feel.

Three Tips for Mental Toughness

As Bjorn Borg showed in his Wimbledon championship match against John McEnroe, you can stay focused on what matters most even when faced with an uphill challenge. Here are three things you can do to keep your mind and body focused on trading:

  1. Be aware of what is going on in your mind, body, and feelings. Slipping into an internal focus seems automatic because we aren’t fully aware of it as it is happening. By being aware of your feelings and what the mind is saying, you can catch yourself before the downward spiral gets going.

  2. Know what trading actions are important to take. These are high-value actions (HVAs) under the trader’s control. HVAs are relevant to trading and they include identifying a sound trade setups and solid entry triggers. You must know these cold and be committed to executing them. 

  3. Commit to high-value actions regardless of how you feel. This means being willing to accept unwanted thoughts and feelings because trading well is more important than feeling good. Maintaining an external focus and initiating positive trading actions may not be easy when feeling down, but it’s certainly not impossible. Like all mental skills, it takes practice.

Be Proactive

You can take specific, proactive steps to help yourself develop mental toughness. One is to keep a trading journal and identify the times when your concentration shifts from the market to internal thoughts and feelings. Once you have your patterns down, you can develop your own “programs” to develop mental toughness.

Most professional athletes and sports teams understand the value of sports psychology and work with sport psychologists. Traders can do this too, as the performance aspects of trading are very similar to competitive sport. Working with a trading psychologist has the advantages of being quicker and more direct, and includes the use of well-researched applications for developing effective mental skills.

However you chose to develop it, mental toughness is a crucial skill for the active trader.

By Gary Dayton, Psy.D.

You can learn more about mental toughness, trading journals, and trading psychology at Gary’s Web site.

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