Break-free from Old Trading and Investing Beliefs
Overcome the Barriers of Trading
Barriers are obstacles that get in our way when we are trying to reach some kind of destination or goal. We find them everywhere, in school, work, driving and even in trading. Most will try to overcome these barriers, each time hopefully learning from the experience to avoid the barrier the next time confronted by it.
At times, one may fail to do so and become frustrated. Consider the futures trader who finds himself unable to get to the next level in trading proficiency. Once frustration sets in, the trader then has removed himself from trying to learn and correct the problem to one taking his frustration out on others. If you ever find yourself being short with your family after having an unsuccessful trading episode, you then have experienced this non-productive state of mind.
A good example of this would be that of a person in a hurry to get to an appointment. In this person’s haste, some speed laws may be broken. When pulled over and given a ticket (barrier), frustration likely kicks. As you carefully drive away, obeying the speeding laws better than anyone else for a short while, you no doubt have a few choice words you’d like to say to that Officer that pulled you over (but hopefully you didn’t share them with him.)
Because you are frustrated, you have removed yourself from responsibility in your mind and are blaming the Officer for being late to your appointment when in fact he had nothing to do with it. You were the one breaking the law.
Traders who become frustrated because of some barrier, may find themselves blaming their system, or maybe it was the brokers’ fault, or maybe the spouse who interrupted you when you were trying to decide what to do because you were already down more than you originally planned to be and were in a moment (long moment) of indecision.
Meanwhile, the real blame never is assigned where it should and recognized for what it is a lesson. Traders normally lose for reasons they may not realize at the moment. Frustration for many is the result that will prevent a trader from becoming a winning trader and increasing his capital investment.
So, what can you do about it if this happens to be you? Now that you acknowledge this about yourself, adjustments can be made. Many times such frustration is the result of incorrectly analyzing the reasons for your inability to trade well. You may think it has something to do with your system and end up trying several with similar results.
This may cause you to abandon all approaches that you’ve worked yourself into for some time and end up resorting to old approaches thinking that maybe they will work better now. This is similar to digressing, and digression will only increase your depression.
The first place to start in minimizing this problem is with your well-being. Do you spend many hours behind a desk staring at a computer monitor? Do you always feel rushed, that you don’t have enough time to take care of things needing your attention? Do you stay up late and wake up early almost everyday? Do you put off exercising? Do you eat the wrong kind of foods?
Your health is the most important part of your trading plan. Without a healthy body, the mind suffers. If the mind suffers, your trading will suffer. Small barriers become bigger ones. At some point, you simply need to stop the madness and take a break.
Sit down and think about what you do everyday. Can you arrange to eat better, taking the time to do so with the family rather than bringing your food to the computer or television? Take time to take time. Schedule a part of each day to exercise, even if for just 5 minutes, as long as it is intense. Make it a habit to end your day at a decent hour each night. Getting up early isn’t a bad thing and can be quite beneficial for getting things done when it is quiet. But going to bed late will only harm you and your ability to cope in the long run. The body needs good food, exercise and rest. If it gets these things, your mind will be in a better position to handle many of the trading barriers you will come up against, and they then can be handled in a way that you will benefit you.
Another important step you will need to take is to readjust your attitude about the barriers themselves. When they frustrate you, in your mind, you are making the barrier your enemy and thus you want to lash out and attack. Again, you end up attacking everything in sight. By looking at these barriers not as your enemy, but simply the normal roadblocks of life, each with a lesson to offer you, your mind starts to take on a more positive outlook of the situation and solutions will likely come to you sooner.
Nobody likes to lose in trading. Yet losing is a natural part of trading and must be recognized as such. The trader must realize in his mind that it is okay to lose, so why get worked up over it. Expect it to happen. As most of us were growing up we were likely told that winning was the only way and losing is unacceptable. Now you are involved in an activity where you find yourself losing here and there.
Your belief system is pulling against you, which is counter-productive. It is important that you realize that beliefs are beliefs and reality is reality. What this means is that it is how you “see” losing. If you have a healthy view of losing when it comes to trading, then your belief of losing becomes beneficial to you. As long as you perceive losing as a reason for anxiety, stress and frustration becomes your master.
So, keep a healthy view about losing. Do whatever you can to trade with manageable losses so that the small losses themselves will further impress upon you that they are part of the process and is not something to get wrapped up about. If you can turn your negative views into positive ones, then you will be on the road to less frustration in trading.
One of the best ways you can improve your mental outlook about trading barriers, such as trade losses, is to reduce your risk exposure. When in a trade, are you using a stop-loss at a manageable and logical price location? If you are not, do so. If you feel you cannot do some calculation or pattern recognition that tells you the stop must be farther away then you can be comfortable with, don’t take the trade. It is your choice, use the power and don’t put yourself into gambler’s mode.
Another way to improve your state of mind is to consider the number of contracts you are trading. In other words, are you putting on more contracts than you can feel comfortable with? It is hard to pin down a main reason why some traders overtrade, thus unnecessarily increasing their stress level, thus setting themselves up for big losses, frustration and major stress. However, if we had to come up with one word to describe it, it would likely be GREED.
Take small steps towards your goal. You will have a better chance of getting to your destination if you aren’t prone to tripping and falling over from rushing in too hard and fast. As well, you’ll be able to handle adverse moves against you with less stress and a much clearer mind. Decisions will be easier to make, and when you lose a trade that is expected to happen now and then, you’ll likely not be looking for the nearest ear to blame.
It isn’t always the amount of money you have in your account that determines how many contracts you should trade. Some traders have a lower threshold for losses although they have big accounts. So don’t think you have to put a certain number of contracts on because you can. Cut the number down until it feels like the losses are insignificant to you. You’ll then be at a comfort level to look around you with a clear mind and see the opportunities as they occur.
Make sure you are trading with capital funds you can afford to lose. Many traders make the mistake of using money they need to pay car payments, mortgage and other bills. Stop right there! Take this test in your mind:
You’ve pulled every penny out of your trading account and are now holding it all in your hand. Now imagine that you threw the whole amount into the file. How do you feel? Are you disappointed because you could of at least have thrown a big party, or are you feeling desperate, confined, hopeless and/or pressured? If you feel the latter, then you are trading with money you should not be. You need that money and trading with it will make you on edge because you cannot afford to lose it.
No amount of good health, proper mental attitude is going to help you because you won’t have the right mental attitude and your health is likely to suffer anyway from it. Make sure you have all your necessities and other obligations easily cared for by your regular income with some in savings before you commit other monies beyond this to trading. Otherwise, it will likely be a lost cause before you even have a chance to get started.
Another thing you can do is to trade markets with smaller margin requirements that don’t make big expensive moves in a short period. You can trade the slower grain markets like Corn, Oats or Wheat, or trade the mini-contracts such as on the Mid-Am Commodity Exchange. Try making fewer trades that each have more concentrated effort in taking. You don’t need to be in every trade every day.
By taking these positive steps, you can greatly reduce your frustration when it comes to trading barriers such as losses, and improve your overall outlook about every aspect of this activity. Doing this will dramatically help you become a profitable and better trader.
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