The mindset of traders can vary from individual to individual, but one of the differences depends on whether you are trading full time or in your spare time. For full-time traders who have already quit their day jobs and considering their only income to be from trading, the mindset can be quite different than a part-time trader. A part-time trader is under less pressure to perform, because there is still a paycheck coming in. That is quite the opposite from the trader who has no other income except for that from winning trades. The pressure in that case can be tremendous, so it is worth taking into account. Besides that, there are other factors that can affect a trader’s mindset.
The Psychological Fear of Losing
If you are afraid of losing, then that will really cut your trading legs out from under you, since there are always going to be a fair percentage of trades that will lose. Think about how you would feel if you lose $1,000 on any one trade. Now think about how you would handle a trade that profits you $1,000. Trades can go in any direction, and it can oftentimes be random. Even if you do everything according to the books and your trade should be a winner, it can surprise you. By being afraid to lose, you might stay in the trade longer than you should and end up losing even more. Remember to set your stops and get out of a trade when it’s going in the wrong direction. Keep your losses small by getting out early rather than hoping against hope that the market will turn.
Be Realistic When Trading
First of all, if you have a trade that isn’t going so well, admit it early on. Say to yourself, “Whoops, I was wrong,” and exit the trade quickly. By not admitting defeat, you might not get out early enough to avoid a whopping loss. If you only want to make huge wins, you might find yourself chasing after trades that are surely going to end up in losses. Again, this can be a difference between traders who have day jobs and those who don’t. You might end up with big wins some of the time, but be realistic in understanding that there will be many losses along the way. Just try to keep the amount of the losss to a minimum.
Improving Your Knowledge Base
Learning and increasing your knowledge base can have a profound effect on your mindset as a trader. Continue to follow trading gurus to gain a better understanding of how trading works and how to predict a market atmosphere that may end up in a downturn. The more educated you are, the smarter your trading decisions will be. Be sure that every trade you make is entered into your trading journal. Then the more you learn, the better you’ll be able to analyze your trading history and make timely improvements.