Have you ever wondered how two traders can have the same analysis on a stock and even enter a trade on the stock at the same time and same price, yet one trader profits from the trade while the other loses money? The answer lies in the mindset of these two traders.
The first trader who sold at target when the trade went in their favor did their job, plain and simple. They not only took profit when the market allowed them to do so but most importantly, they did their job and just like in any other job, when you perform your job well, you get rewarded.
Now the second trader, well, they had a different mindset. Their plan and intention started the same as the first trader. They entered the trade at the same price and chose the same stop and target. The difference with this trader, however, is that they did not have the mindset of a profitable trader.
The difference between profitable traders and losing traders is staggering. Of a 100 people who trade, 80 of them will lose the majority of their account. This is a staggering truth but one that can change. So, the question is, how does one go from the 80% of losers to the 20% of winners.
The answer, though, is one most ignore as most traders spend more and more of their time chasing something new or something else rather than address the real issue. In life, the basic premise is that if you want to get ahead, or you want to get better at something, you must do more. If you want to get a chiseled body for summer, you have to devise a workout plan that involves a lot of cardio and resistance training. Then you must do your cardio and resistance training a lot. You can’t skip a week or cut a workout short, not if you want to have that chiseled body you desire.
The more you stick to your plan and implement it daily, the more the pounds and fat come off, and more of your muscles start to show. There is only one recipe to get a chiseled body, and that is design a plan of doing more and more cardio and resistance training, and then wanting it badly enough to stick to the plan no matter what.
The success lies in the repetition. In most things in life, the winning formula is to plan and then have a burning desire to want it badly enough to take action consistently.
Here at TradeSmart, we have traded long enough and coached enough traders to know most traders trade without a plan. A lot believe they have a plan with their analysis. If I can figure out which direction the stock will go, then I will make money. I will learn to analyze and determine with confidence what XYZ stock will do, and by doing this, I will make money. This sounds logical, but how many traders do this, and they make no money or lose money. The answer is about 80%.
Let’s look at it this way. How many times do you turn into trading labs, and a student asks a question such as when should I get out of my XYZ stock? Well what was your plan to get out before you entered the stock the moderator asks?
Well, I bought at 40 my target is 50 but it is trading at 37, and I have a stop of 36, but it doesn’t look good even though my analysis suggested it would go higher, but it only went to 43 then reversed, and now I don’t know what to do. Is there a way I can save this trade? This happens almost every trading lab. Why? Because most traders have no plan. They want to make money but trade in a manner that moves them further and further away from their goal.
Most traders, about 80%, do not understand probability. If a trade or two didn’t work, or a new strategy they are trying has a losing trade or two, then their immediate reaction is to abandon that strategy and look for something else.
There must be a strategy that has no losing trades and can withstand any market condition. It is not me that is causing me to lose, but it is the current market, or this strategy is not working anymore, or I need to go-learn more or try something else.
Most traders, about 80%, believe their lack of results lies in the market or their not knowing something. This causes them to trade in a manner that is random and moves them further and further away from the result they want. The best traders know that not all trades work, but repetition and probability are the key to long-term success. Every trader’s success lies inside of him or her and not in the markets.
If you truly want to make consistent money trading the markets, the best thing you can do right now is to master yourself. Devise a plan and then invest and spend time working on your mindset to trade in a manner that allows you to make money.
It is not the market, not any lack of trading idea, no perfect strategy you don’t know about, and no magic way to find trades or anything else outside of you. The answer lies in trading in a manner that allows you to make money. All the rest is just a conversation.
Trade well, my friends.