Trading Psychology – The Universal Law of Trading Confidence
One of the traders I work with said to me, “If I were more confident, I would be a good trader.” I asked in response, “What do you think will make you more confident?” She said, “Make more winning deals.”
Unfortunately, this is the wrong answer. She believes that its results will bring her the confidence she seeks. This is what most aspiring traders think.
Where does true business confidence come from?
Developing lasting confidence in your real-time trading skills and abilities doesn’t come overnight. It’s practical. And it is the process of “getting there” that we focus on to improve and “be a good trader”. Confidence comes from mastering the various skills needed to read the market and execute and manage trades. Mastering these skills and abilities is the process of trading and this is the process that brings confidence. Confidence really doesn’t come from more winning deals. In fact, more winning trades come from a dedicated focus on the process.
How to keep improving and add to confidence
The key to building self-confidence and maintaining the skills and abilities you’ve already developed so far is understanding how we learn. Although we can certainly learn quickly, learning cannot be rushed. This is especially true with the multifaceted skill sets required in trading. Too often I see traders try a strategy or indicator, have a loss or two, and drop that strategy like a hot potato. Again, their focus is on results. This flawed mindset will only lead to your frustration; Permanent improvement and true confidence will always be elusive.
Learning is not linear. It does not happen in a straight line. We don’t start at point A and progress steadily to point B. Instead, learning happens in a series of ups, downs, and plateaus. It is very similar to the swings that occur to the upside. We experience spurts of growth and development, step back a bit, advance further, and then relax a bit as we reach a new plateau where we consolidate what we have learned.
Misguided-minded traders are thrilled with the ups, depressed with the downs, and bored with the plateaus. Again, their focus is on results. How could anyone develop true confidence in such a roller coaster?
Where trading confidence really is
Confidence is found at the learning plateau where our gains are consolidated and our abilities stabilize. Confidence in progressions is not found because that is not our true skill level. Learning did not have time to take root. The dips in our learning curve are not places to be afraid or depressed. Downs are welcome. Why? Because this is where we learn what else we need to become better. Where else do we get this important information? Plateaus are not the place for boredom. They must enjoy it.
