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Tips to Improve Your Trading Mindset
By: Phillip Konchar
Trading the financial markets can be a tough journey, especially if you constantly feel
that your mental energy is depleted and that you have a difficult time to focus on the
markets. Fortunately, there is an effective way to return the excitement that trading
carries along – by improving your trading mindset. In this article, we’ll take a look at
what a trading mindset is all about and why it has such a large influence on your trading
Are you short on time?
Here is a list of the most important points to develop a positive trading mindset:
1. Develop an effective morning routine. Wake up earlier than usual. Working out or
mediating early in the morning can help you to approach the market relaxed and
2. Never stop learning. A financial market education forms the foundation of any
3. Always have your losses under control. Develop effective risk management rules.
4. Keep a trading journal. Spot common mistakes and fine-tune your trading strategy.
5. Observe others. Replicate successful strategies and learn from the mistakes of
6. Control your emotions. Don’t get overly emotionally attached to a trade and
practice your trading discipline.
7. Remember that the market is neither moral nor immoral – it’s amoral. Losses are
nothing personal, and even professional traders take a hit from the market from
time to time.
What is a Trading Mindset?
Markets are neither moral nor immoral – they’re amoral. The markets have no emo-
tions at all, so it’s completely up to the traders how they perceive the market to be. If
your goal in the long run is to attain and maintain the status of a trader, it’s very im-
portant to develop a mindset that helps you observe the market from an unemotional
Your mindset will ultimately define your reactions during losing trades or large profits
– will you be able to stay calm during these events and avoid reacting based on emo-
This is what a well-rounded trading mindset is all about. A disciplined trader will never
let emotions to interfere with his or her trading decisions. However, bear in mind that
it takes much effort to achieve the status of a disciplined trader. You don’t become a
professional overnight in any business, and trading is no different. As one famous
trader said, “… don’t be a hero. Don’t have an ego. Always question yourself and your
ability. Don’t ever feel that you are very good. The second you do, you are dead.” –
Paul Tudor Jones
Find out: Who are the Best Forex Traders in the World?
Why is a Positive Mindset Important?
As we already said, the market has no emotions at all. All emotions come from market
participants, who are still predominantly humans. This is why chart patterns and trend-
following techniques work so great in trading – they rely on well-known patterns of
human behaviour and take advantage of market psychology.
However, you may have heard that 90% of traders lose 90% of their trading funds
within 90 days. It’s important to ask yourself what are the main psychological traits that
distinguish the remaining 10% of successful traders from the majority of other market
All of them humans, but a small group of traders still succeeds to significantly outper-
form all other traders combined. While it’s very unlikely that they have found the holy
grail of trading, the truth is that one psychological trait comes very close to it – a
Top Tips to Improve Your Trader Mentality
If you feel that your trading mindset needs a push, follow these top tips outlined below
to learn how to survive the trading game.
#1 Get in the Right Trader’s Mindset
Traders can benefit a lot from approaching the market from a calm and relaxed men-
tality. If you have proper risk management guidelines in place, there is no need to
worry about trades at all. In the end, what can go wrong? Even if a trade hits your stop-
loss level, it’s not the end of the world.
Losing trades happen all the time, and even professional traders have a winning rate
closer to 50% than you might think. With a high enough reward-to-risk ratio, which is
the ratio of your potential profit and potential loss on a single trade, you’ll still end up
in profit even with a 50% winning rate.
A losing trade doesn’t mean anything personal. Markets go up and down all the time,
and you need to have faith in your market analysis. Remember, markets don’t have
emotions, and traders who avoid succumbing to their own emotions tend to signifi-
cantly outperform traders who let their emotions interfere with their trading decisions.
Having a morning routine may also help a lot to approach trading relaxed. Try waking
up earlier than usual, work out or meditate and sit in front of your trading desk with
faith in your analysis and risk management principles.
#2 Keep Learning
Education is probably one of the most important factors that separate successful trad-
ers from unsuccessful ones. Even if you already have the right mindset, you need to
have a solid foundation of the markets to understand the reasons behind certain price-
moves or market reactions. While there are many concepts in trading worth learning,
your best bet would be to keep learning until you find the tools that best suit your needs
and trading style.
Try to spend at least one hour before bedtime to read a trading book in order to get an
insight into the practices of other successful traders. In addition, online trading courses
are also a great way to increase your knowledge about the markets.
9 Day Trading Books That’ll Up Your Game Considerably
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#3 Don’t Let Losses Get Out of Control
A common mistake among beginners in the market is the way how they manage their
losing trades. Usually, novice traders wait for a losing trade to become profitable again,
as they don’t want to close the trade in loss.
As you can see, emotions are again interfering with rational trading decisions which
can be very costly in the long run.
The following table shows how much return a trader has to make to return to his initial
balance, after losing a certain percentage of his trading account:
Amount of Balance Lost Amount Necessary to Return to Initial Balance
If you lose 50% of your trading account, you’ll have to make a 100% return to be break-
even! This can be a very tough undertaking.
Instead, try to manage losing positions like a professional trader, who are very impa-
tient with losers. If one of their trades is slightly in minus, signalling that their trade
setup isn’t playing out as expected, successful traders will close that trade and move
on. They cut their losers short, and let their winners run. In the long run, this can make
a real difference to your bottom line.
#4 Keep a Trading Journal and Make Regular Retrospectives
Another great way to attain a successful trader’s mindset is by keeping a trading jour-
nal. Trading journals are just like regular diaries – only that they include the trades you
make. Journals consist of journal entries, which can cover anything that you think
might be important about a particular trade.
Standard journal entries include the currency pair that you trade, the reasons why you
got into a trade, its entry and exit levels, and additional market commentaries. Once
you close your trade, develop the habit to update its journal entry by the trade’s profit
or loss, and any additional comments which might give an insight into the performance
of the trade.
Making regular journal retrospectives can reveal a wealth of information about your
common trading patterns that lead to losing trades. Maybe the majority of your pull-
back trades turned into losers? Your trading journal will show that and help you to
improve your trading skills.
#5 Observe the Actions of Other Successful Traders
One of the best ways to learn a skill is by observing the actions of people who have
already mastered the skill. Trading is no different from any other skill, and replicating
the process and work routine of other successful traders can make miracles for your
Finding a role model among successful trader might be difficult at best, but fortunately,
there are dozens of excellent books that you can pick to get an insight into the mindset
of those traders.
“Trading in the Zone” by Mark Douglas is a classic that every beginner in the markets
should read early in his trading journey. Another exceptional book which could help
you in attaining an effective trader’s mindset is Stephen R. Covey’s “The 7 Habits of
Highly Effective People.”
#6 Control Your Emotions
Emotions play a big role in trading. In an ideal world, there would be no emotions
attached to the markets and all traders would analyse trade setups from a completely
objective standpoint. Nevertheless, the majority of traders are still humans with emo-
tions such as fear and greed, which more often than not interfere with a rational deci-
Inevitably, there is fear involved with a losing position and greed when a position turns
green. Our job as traders is to learn how to control those emotions so that we can
maintain a clear picture of the market and make rational trading decisions. This is how
Colm O’Shea, a trader at George Soros’ hedge fund, describes his boss’ complete
absence of emotional attachment to a trade:
“I remember”, he says, “one time he had this huge Forex position. He made something
like $250 million in one day. He was quoted in the financial press talking about the
position. It sounded like a major strategic view he had. Then the market went the other
way, and the position just disappeared. It was gone. He didn’t like the price action, so
he got out. He doesn’t let his structural views on how he believes the market will play
out get in the way of his trading.” – Colm O’Shea
#7 Remind Yourself that the Market Doesn’t Owe You Anything
One common mistake that many traders continuously make is overtrading the market.
Especially after a trade goes wrong, some traders feel the urge to chase the market
for trade opportunities, only to accumulate hefty losses by the end of the day.
This is not how the market operates. The market doesn’t owe you anything, and it
might be a wise decision to repeat this mantra every morning you wake up.
Some days there are extremely lucrative trade setups, and the other days there might
be nothing. This point strongly relates to the previous point of controlling your emotions
and having trading discipline. Don’t feel angry at the market once a trade turns into a
loser – remember, the market has no emotions about you at all.
Read: Why FOMO Can Obliterate Your Trading Profits
How to develop the right mindset when trading?
Developing and maintaining the right trading mindset is crucial for long-term success.
While it can’t come overnight, certain techniques can help to accelerate your perfor-
mance. Some of them are developing an effective morning routine, educating yourself
about the markets, having losses constantly under control, keeping a trading journal
and making regular retrospectives, observing and replicating the actions of other suc-
cessful traders, controlling your emotions and not getting too much emotionally at-
tached to a trade.
How not to sabotage performance?
While there are many reasons why traders sabotage their performance, arguably the
most destructive one is letting emotions to interfere with your trading decisions. Fear
and greed are common emotions that many undisciplined traders have all the time
while trading. Imagine a trade that is $1,000 in profit, but your analysis shows that the
trade has a potential of reaching a profit of $3,000. Would you let fear of losing those
$1,000 of unrealised profits interfere with your analysis, or would you let the trade run
until it reaches its initial profit target of $3,000? Having faith in your trading strategy
and analysis is very important in maintaining a trade’s reward-to-risk ratio.
What are some trader brain exercises?
In my personal opinion, the best exercise you can get is both joining a community such
as My Trading Skills and practicing trading on a demo account. Whether it’s a demo
account or real account, the best way to gain experience and trading knowledge is by
constantly following the market and questioning why a trade is performing good or bad.
Speaking about brain exercises for traders, did you know that you can even trade
during weekends? Well, not with real money. Simply open a chart, scroll it to some
past date, and make a few paper trades to fine-tune your trading strategy. The good
part about this approach is that you can cover weeks of price-data in just a few hours.
Suggested Reading: Can You Trade Forex While Working Full Time?
Phone: +44 (0)1428 738305