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A Trader's Mindset

Last week we talked about what an edge is and how we might create one for ourselves. That’s a really important conversation and process that every trader should be working on. But in reality you can only start looking for your edge after you’ve laid a proper foundation for being a trader. Today I want to take a look at the building blocks of that foundation from a bigger picture perspective. We talk a lot about risk management and trading plans, but those are only components of a more encompassing strategy. If you're serious about being a trader this strategy becomes a reflection of yourself as a whole and merges with your entire system of existence.

I believe every action we take in trading is in fact a direct reflection of who we are as a person. Our state of being in the present moment directly affects how we operate in the market. When viewing trading through this lens it becomes apparent that there’s a whole realm of mastery that we need to achieve that has nothing to do with actually taking a setup. Personal development and your relationship with yourself become just as, if not more important than knowing the technicalities of trading itself. The cool thing is that working on yourself has benefits in every area of your life and is probably the most valuable work you can be doing.

So what is personal development then? Obviously this means a million things to a million people and I would never even try to define it for everyone. What’s important here is that we find what works for us, and the best way to find it is to always be on the lookout. Here are some things that have helped me on this journey.

Get to the bottom of who you are

Self discovery is a necessary part of being human. Great ground can be covered in our personal improvement if we can break down who we are and what makes us tick. It’s no surprise that this is also an important building block for our trading strategy. We need to be self aware if we want to make it as traders. Everything we think or feel will reflect in our trading and if we haven’t identified these things then they will run wild and break our plan. 

Self awareness is an ongoing process that takes an endless amount of work. It’s something that will never be completely mastered and is better thought of as a work in progress. It requires a tremendous amount of honesty with yourself. You must also find a way of stepping outside of yourself enough that you can get a good look at who you really are. The most effective method I’ve found is journaling. A big part of this process is identifying and analyzing your behavior and you need data in order to properly do this. Writing everything down creates the ability to step outside of yourself and be objective. It starts to loosen the bias of your thoughts and then gives you something you can review later. It’s the beginning step in a revolving process of identifying, analyzing and modifying behavior. 

Some questions that help the journaling process:

What are my personality traits? What are my patterns and routines? What is my work process? Do I plan and create a schedule? Do I follow that schedule? What is my general mood or state of being? Is that state of being consistent or does it vary from day to day? Am I operating on a consistent basis or are my activities more random? Am I in touch with my own greed? Do I get angry when I have a losing trade? How does a winning trade make me feel?

Realize you are continually evolving and growing

The markets change, we change, the weather changes. Nothing stays the same forever and we need to realize and accept that change is always upon us. What works today may not work tomorrow and it’s important to establish a positive outlook on managing this change.

We’re trying to do more of what works and less of what doesn’t so look for ways to change for the better. What can we do to manifest positive behavioral changes?  How can we learn from this and grow?

Use your journal to document this evolution. Reflect on it often and hunt for ways you can either do better or eliminate mistakes. 

Create a rinse and repeat framework

Because we are always evolving, this can be a really difficult hurdle for us. A rinse and repeat framework means that we’re manifesting a cyclical pattern in our behavior.  Consistency is key in trading but in order to remain consistent over time we must be operating within predetermined rules of behavior. Once we have our approach, it is then crucial that we make our actions repeatable, and then work on repeating that action with no variance. Overtime we can measure our consistency and see where we’re doing well and where we are struggling.

Learn from and share knowledge with others

It’s hard to figure out everything in isolation and much easier when you work with others to share ideas and viewpoints. It’s important to seek out a community. For me, finding TRI was a big piece of the puzzle and I continue to believe that it provides great value for anyone who wants to jump in. It’s very much a manifestation of these ideas I’m presenting here. We are a large group of people from many perspectives who are all working towards a similar goal of figuring this trading thing out. Listening to others and sharing my experience has proven instrumental in learning about myself and my own behavior. It also creates an open doorway that provides support to anyone who is willing to do the work of going down this path. 

Last thoughts

I’m only touching on a few points here but the key is developing a mindset that is going to set you up to take on the challenge of creating and implementing a trading plan. Choosing to not do this prep work in the beginning will only lead to difficulties down the road. Our mindset and state of being is everything in this game. If we’re generally in a healthy state of mind and body then we will greatly increase our chances of making better decisions. Therefore we must explore ways of improving our mindset. 

This post is part of a series of writing I’m doing to define what I think it means to be a trader. We’re beginning a new school term in May and I thought sharing some of these ideas would be helpful to anyone exploring trading and thinking about joining our school program. Look for more of these in the coming weeks. Writing this stuff down is incredibly valuable to me and I hope you find value in it as well. Thanks for reading!


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