Let’s Review – What Kind of Trader Are You?
The Right Mental Attitude – Confidence, Not Arrogance
To enter the financial markets can seem a lot like feeding yourself to the lions. After all, many of the sharpest minds on the planet are all there – waiting to swallow your little account up as quickly as possible. These people have economics degrees, business management degrees, and earn mega-salaries (and bonuses). They control many billions of dollars. Some will have inside information. They have all the latest technology and software to give them an edge. And they are all watching and trading the same markets as you!
Not only that, but the commentators in the press, on their blogs, on TV seem to know so much and are so convincing in their pronouncements. They give entirely convincing arguments as to why you should buy this or sell that (although the industry is heavily geared to the buy side, curiously. I have rarely heard a pundit advise outright selling of a market, especially a stock!).
‘One of the most strikingly evident traits of all the market wizards is their high level of confidence. But the more interviews I do with market wizard types, the more convinced I become that confidence is an inherent trait shared by these traders. All honest self-appraisal in respect of confidence may be one of the best predictors of a trader’s prospects for success in the markets’ – Jack Schwager, Stock Market Wizards
So what chance does little old you have to beat these pros at their own game? Good question.
Against these odds, then, you should adopt an attitude of David against Goliath – of humble confidence, not arrogance (especially when markets are going your way).
Try to avoid the herd mentality when a trend is long in the tooth. Develop a mindset of asking ‘What if’ – and never become complacent. Complacency is the forerunner of disaster.
Choose Your Battles With Care
As in war, you should only enter a trade when you have all or most of your ducks lined up in a row
- Know where you are in the Elliott Wave pattern. Is the minor trend up and the major trend down? That gives you a clue which time-frame to trade.
- Is the market clearly trending? Can you draw solid trend lines?
- Can you see a divergence in the Momentum Oscillator after a long move?
- Are there any support/resistance lines that you could use?
- Can you spot a point where a breakout could happen?
- Is the mood of the market one-sided – too bullish or bearish?
Whether you are day-trading or longer-term trading, the more of these kind of confirmations you can have, the greater the chance of the trade being a winner.
Develop A Winning Attitude
I don’t know many outright pessimists who are great traders! Perhaps on the outside, you may appear somewhat low-key, but on the inside, you will be quietly excited about the prospects of placing a trade on. Perhaps nervous as well. You have done your research and the trade makes sense – so go for it.
All you have to do now is pull the trigger! If you find that difficult, by all means use stop entry orders, or limit entry orders. I know some traders find placing the trade difficult. But practice makes perfect!
I wish you every success in your trading career!
Join the discussion