The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
8 Steps to Mental Mastery of Trading
01/12/2015 6:00 am EST
Though the mastery of trading is a long and uneven process of consistently looking for improvement combined with a high level of discipline, the staff at ColibriTrader.com offers eight steps that—though not a prerequisite for successful trading—can serve as tools for improvement.
Steps to Mastery:
STEP 1: Emotionless
It is essential that the master trader trades from a perspective of rationality and skill and not from an emotional perspective. To a certain degree, the master trader should be willing and able to learn how to act in a contrarian way to human nature. In other words, the master trader needs to know how to harness the power of consciousness. In a way, this is like inventing a new perspective, which can give you the ability to see the market in a different angle, while at the same time being able to take responsibility for your own deeds
STEP 2: Visionary
Every master trader should be able to envision the end result and then follow a predetermined set of rules in order to achieve these results. Master traders are trading in terms of commitment to a higher goal, as opposed to reaching self-fulfillment. For this step, it is important that the master trader should be able to get rid of assumptions about himself/herself and be ready to act in the next moment disregarding old illusions. Thus, following his/her own momentum the master trader enters in the moment or in the zone as others are referring this phase to. This is the moment, when the old habits do not matter and you trade through the prism of your consciously chosen objective. You are taking a new challenge and the self-limiting of yourself is left behind to only come closer to your pre-defined objective. In this stage, you are learning how to get out of losers or uncomfortable positions, while your objective is pushing you subconsciously to move closer to your goal. The master trader thus puts essential emphasis on controlling losses.
STEP 3: Keep up the Momentum
It is really important that in the course of building up the equity curve and making profits, the master trader keeps the momentum. It is not rare that when traders reach their targets (or come close), they blow up their accounts. This outcome is more or less due to the fact that reaching your goals is putting you in the realm of the unknown, thus coming back to the comfort zone or your starting point acts as an excitement-relief tool. Therefore, master traders should learn how to be comfortable with success. It is important that the master trader continues to envision greater goals and sustain the momentum throughout. In order to do that, the master trader should learn how to separate what happens on the marketplace from his/her own emotional responses. The master trader then needs to accept the fear of being in an unknown zone by strong willpower and stop trying to change this new state. In other words, one needs to be able to accept the unknown and embrace it with both hands. The master trader should aim at reaching a phase, where he/she should not focus on what others think of them. The master trader should not be surrounded by his/her own thoughts of winning/losing, but on the target and how to reach it. The master trader should aim to be in a state where trading is not an exhilaration by itself, but a commitment, where trading opportunities are taken effortlessly with the sole aim of reaching targets.
STEP 4: Control Freak
The master trader should get out of the habit of being a control-freak of what is happening on the marketplace. One should be able to get rid of the feeling of being special in any way and just take what the market has to offer along the way. That's the time to liberate yourself of any fears that are deeply ingrained in your subconsciousness and start acting in a realistic way without trying to control the market or trying to predict future events. You should learn how to cope with your inner desire to predict the way of the market and instead follow your trading plan. Instead of being too euphoric or fearful, the master trader is already ready for the next trade, without even thinking about it. The master trader already knows that a few successful/losing trades do not mean anything in the long run.
NEXT PAGE: What Does It Even Mean to Be In the Zone?|pagebreak|
STEP 5: Being In the Zone
Mastery is a psychological state of mind where there is no fear or desire, but only the chance to exist. The master trader should empty himself/herself of ego and fear and concentrate on the larger objective, not being concerned what others are thinking. The master trader should put all his/her efforts on the process of change, or becoming what they are really capable of becoming. In other words, entering the realm of the unknown. The master trader should forget about perfectionism. Rather, he/she should embrace the unpredictability of the future. As a master trader, you should learn to trade in a new way- one that makes you keep inventing the pathway as you move along towards the desired position where you have reached your targets emotionlessly.
STEP 6: Being Honest with Yourself
To be in the zone, you need to be honest with yourself. You must step outside the self-doubts and fear of uncertainty. Trading to win is forcing you to act outside the comfort zone and being able to grasp opportunities whenever they present themselves. The master trader is able to align reality with the consciously designed vision, rather than imaginary beliefs. The master trader is able to move beyond the past and concentrate on his/her pure vision with discipline and honesty. The master trader knows that the best thing to do when results are not consistent with their objectives is to be completely honest with himself and avoid the process of covering up the breakdown. If things don't work out as planned, there is no reason to feel guilty- this is not a reflection of you, but a measure of where you are standing in relation to your goals. In such circumstances the master trader is not blaming bad luck or the market, but looking closely to see what has been the mistake done and how it could be rooted out. Yielding to reality releases the master trader from some early learned behavior patterns of trying to appear to be someone other than himself/herself.
STEP 7: Turning Breakdowns into Breakthroughs
Breakthroughs occur when you can see the world around you in a new light. This is the moment when you do give yourself the permission to express your vision effectively. In such moments that a master trader is consistent with his/her commitment to their vision and can express it in the form of a new trading idea. Such breakthrough moments occur when the master trader decides to consider what has been going wrong in the past and decides to take the honest route and acknowledge the problem and take full responsibility for his/her actions. Such moments are a great experience and they do differentiate the master trader from the hobby-trader. In short, handling the breakdowns in the context of new perspectives produces breakthroughs.
STEP 8: Control Anxiety and Euphoria
The master trader knows how to tolerate profitable positions and does not allow feelings of euphoria to throw in. Such feelings might be as destructive as feelings of fear and withdrawal. Feelings of triumph and euphoria might trigger anxiety and guilt (if one feels undeserving) or cockiness and a relaxation of discipline, which will keep the master trader from reaching the ultimate goal. Satisfaction should come from the development and implementation of trading strategy/skill and not just from profit and loss statements. Feelings of euphoria are detrimental because of one more factor- unnecessary risk taking. It has been pointed out in the previous part of The Master Trader that one should be able to keep the momentum and here it really important that you will be able to keep this balance. You should get rid of the dangerous habit of thinking that you have stretched yourself too far or that you won't be able to do this again. But before all that you need to let go of negative self-concepts, as well as negative ideas about making money.
By the Staff of ColibriTrader.com
Related Articles on STRATEGIES
Has Mr. Market (S&P 500/Equities) priced into too much positivity, while inflation remains at ba...