How to Build a Winning Trading Mindset

trading mindset

To be successful in trading, you need more than a winning strategy. You need to have the correct trading mindset to succeed over the long run. A trader with a winning strategy but who starts being overconfident about it may end up losing control and making mistakes. To be a winner, it’s important to have several edges against all the other traders. One of this edges is mental – you should think like a winner to become one. In this article, we present 9 characteristics of a successful trading mindset, which will give you some powerful insights to complement you as a winning trader.

 

1 – Flexibility

First of all, you need to be flexible and open-minded. Especially in Forex, given that the market is open 24h a day, you need to be flexible enough to trade during the London session, the New York session and the Tokyo session. A good opportunity may appear at any time, and you need to be ready to be there and catch it. Besides, open-mindedness is really important when analyzing a currency. Markets change fast, and what was true last week may not necessarily be correct this week. You should always keep your mind open to sudden changes that may occur.

 

2 – Find what works FOR YOU

There are some traders who prefer to risk more, others prefer to trade only during a certain session, others like to look only at fundamental analysis and some only trade on technical analysis. This means that each one of us should develop a strategy that is good only for himself. What has proved to be a winning strategy for your partner may not necessarily work that well for you. He may look at the market in a different way than you do, and the strategy will reflect that. In this sense, you should discover what is your trade profile and start working on a personal trading strategy or use a proven trading strategy that fits you.

 

3 – Don’t be overconfident when you win

We all know how it’s easy to become overconfident after a good winning streak. However, it’s crucial to maintain the same posture towards trading as always. If you become too confident and start being more relaxed about your trades, hoping that you’ll continue to win, you may end up losing what you already won because of your sloppiness. Basic mistakes can occur due to a lack of attention. Instead, you should “convert” your confidence into focus to keep having good results.

 

4 – Don’t lose your confidence after some bad trades

As important as not being overconfident when you win is to not lose your confidence after some bad trades. It’s usual to have some bad moments and enter on a losing streak. This doesn’t necessarily mean your strategy is failing or you’ve lost the plot. Even the best strategies happen to fail under certain market conditions, and losing is important to improve your trading. If you’re having troubles in being confident, you may want to check our article on 3 Ways to Boost the Confidence in Your Trading.

“Losing a position is aggravating, whereas losing your nerve is devastating.”

– Ed Seykota

 

5 – Don’t trade to get your money back

As we all know, it’s difficult to remain focused after a bad trade. Besides losing confidence, it’s usual to see traders getting angry and trying to recover what they’ve lost. First of all, don’t let your emotions interfere with your trading, that will only guide you to a poor performance. Second, don’t trade just to recover your losses, as you’ll probably end up losing even more.  Instead, you should remain calm and recover what you’ve lost over a certain period of time and get back on track. Haste will not lead you to good decisions. Besides, getting into a confrontation with the market won’t recover your losses. Don’t be mad at the market, try instead to think about what went wrong and improve it.

 

6 – Don’t trade just for the money

This may seem a little bit strange since the majority of traders do it to earn some money. However, some of the greatest traders of all time, like it is the case of Ed Seykota, reach a state in which they “forget” about the money involved and are much more focused on being good traders than in the money they can make. Always thinking about money may prevent you from focusing solely on your analysis and making the right trades. Moreover, if you’re a good trader, the returns will eventually come.

 

7 – Be patient

One of the most important characteristics of a successful trader is being patient and wait for the right chance. The market is full of opportunities, you only have to be aware and get the right ones. Sometimes prices may be flat for a long period of time, without any major change worth trading. During this time you should not “force” any trade, simply wait for a better time. Some strategies work better under specific market conditions. By applying them in a different way, you may risk its failure. If you wait for the certain opportunity, you’ll have a higher chance of success.

 

trading minset

 

8 – Trade with money you can afford to lose

In our article about money management, we give some advice about how much money you should put in each trade and how you can ensure a positive expected return. It’s crucial that you don’t risk too much in each trade given that, if things go against what you planned, you may end up losing more than you can afford. Take small losses and let your profits run. The more you lose in each trade, the higher your winning rate has to be in order to be profitable over the long run.

 

9 – Be realistic

The final characteristic of a successful trader is the ability to be realistic regarding your expectation. If you don’t already know how much money you should expect to make in Forex, our article may give you some help on that. No trader starting with 1000€ can expect to win like 10,000€ per month. Your account will grow slowly at the beginning and then the compounding effect will ensure you win more as time goes by. Keep a realistic expectation about what you can win and define your goals according to that view.

 

 

The Bottom Line

To be a successful trader, you have to get as many edges as you can, and the mental edge is one of the most important. The above-mentioned characteristics are some of the ones you should try to implement to improve your trading mindset. This will complement your strategy and turn you into a mentally strong trader, able to go through bad times and prosper on good ones.