8 Beliefs That Make Successful Traders

02/18/2015 6:00 am EST


Consistently profitable traders have a mindset that allows them to routinely adapt to changes in the markets, writes Janice Dorn, M.D., Ph.D., of the Trading Doctor, listing eight core thoughts that define their mentality.

"One bright day in the middle of night two dead boys rose to fight. Back to back they faced each other, drew their swords and shot one another. A deaf policeman heard the noise, and saved the lives of the two dead boys. If you don't believe this lie is true, ask the blind man, he saw it too." -Unknown

We are hard-wired to believe and hold to these beliefs, often in the face of contradictory evidence. In life outside the markets, this may achieve many purposes and actually be a source of strength. This does not, however, serve a trader well. 

One of the most important questions for the trader to ask every day is "What do I believe that is not true?" And how do we know the truth? The markets tell us. It really is that simple, and yet so difficult for most to accept and practice on a daily basis.

It is important for a trader to assess beliefs regularly, because at any given market moment, the trader is the composite of his or her beliefs. Fortunately (for some) and frustratingly (for others), beliefs about the markets are fungible and fluid. They can change from minute to minute and the successful trader is in the flexible flow with this and changes accordingly.

8 Beliefs of Successful Traders

  1. The markets provide a constant stream of opportunities
  2. If I miss an opportunity, another will come along
  3. If my position is stopped out, the hypothesis that got me into the trade was incorrect
  4. I take one trade at a time, and I stay in the moment with it
  5. I strive for excellence, not perfection
  6. I maximize profits by losing small
  7. I am not my trade
  8. I take complete responsibility for my thoughts, feelings, and actions in the markets

8 Beliefs of Unsuccessful Traders

  1. I must be trading something all the time
  2. If I lose on a trade, I feel angry, frustrated, sad, or sick. If I win on a trade, I am a happy camper
  3. If I don't get on board with the hot tip of the day, I will miss out
  4. The markets are out to get me
  5. I am unwilling to take the stop out, so I am turning this trade into an investment
  6. If I just keep studying and looking and reading, I will find the magical formula/indicator/guru to lead me to riches
  7. Everything has to be perfect for me to get into a trade
  8. If I win, I was skillful. If I lose, I was unlucky

It is only through daily assessment of beliefs with radical honesty that a trader grows, develops, and thrives. Diligent examination of beliefs and the courage to change them is an ongoing challenge that must be conquered if the trader is to move to higher levels of success.

"Believe nothing just because a so-called wise person said it. Believe nothing just because a belief is generally held. Believe nothing just because it is said in ancient books. Believe nothing just because it is said to be of divine origin. Believe nothing just because someone else believes it." - Buddha

By Janice Dorn, M.D., Ph.D., of TheTradingDoctor.com

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