Keys to building a strong Traders Mentality (Probability Mindset)
There are many hindrences to developing the probability mindset, and it would be easy to write an entire book dedicated to them all. However most of these issues fall into four broader categories; fear, false beliefs, trading the "now moment", and edge execution. In the following paragraphs we will touch on these key issues and simple ways to address them.
Fear
As humans we all experience fear throughout our lifetime and so much so the "fight or flight" response has been genetically enbeded into our DNA. Many traders believe they will natuarlly be able to “trade as a computer” after X amount of practice or experience. They assume these components of human nature will eventually give way and soon they will be able to trade without fear or emotions. There is a problem with this theory. We are not computers, and never will be. We are human, which means we are susceptible to emotions and fear responses that are built into us. We are also far from perfect, and full of mistakes, furthering us apart from computers. With this said, it is extremely unlikely a trader will be able to over-ride his natural insticts without slowly and gradually changing his way of thinking first. The best way to overcome fear is through exposure in small doses. For example someone who is afraid of heights, is not taken to a fifty foot cliff and forced to jump off. And he surely does not overcome this fear spontaneously, or naturally after any period of time. Instead he is slowly exposed to heights and as he gets comfortable, taken to increasingly higher points. He may jump off a ten foot cliff, then twenty, and so on until he reaches the fifty foot cliff and jumps off. It is important to realize his fear was never removed completely, but rather he was able to cope with the fear and still jump. This model can be applied to trading, whether it is slowly building a position size, executing an edge every time it is present, or getting comfortable being in the market with looming uncertainty.
Fear can often be debiliating, and is a major hurdle to overcome when transitioning from an amateur to professional trader. The most common result of fear is "anaylsis paralysis" where a trader is unable to make an action due to information overload. There are many different types of fear that occur while trading. Fear of failure, success, missing out, leaving money on the table, and mistakes, just to name a few. It is normal to feel uneasy when putting on a trade or while in a position. The problem lies within hesitation when fear prevents you from entering an otherwise reasonable trade, or any other necessary market action (take profits, cut a loser, hold longer, ect). If you find yourself not entering a trade, there are only two reasons why. First, the trade does not meet your edge criteria, which is a completley valid reason to not enter a trade. The second which is a problem, is fear. When a trader stops entering trades meeting his criteria due to internal fears, he begins to cherry pick trades, and skews his traders equation. This can mean the difference between a profit and a loss at the end of a series of trades. Understanding and recognizing fear within yourself and the market is vital to profitable trading. Awareness of fear within yourself is the first step to overriding and correcting it. And recognizing fear in the market is often a good opporunity to position a profitable trade. It can also be helpful to realize fear only exists in terms of one's ego and is not actually real, only percieved.
Using "Halfsky" position to overcome fear
Many traders experience fear and hesitation after a series of losing or winning trades. When he passes on a trade which works, he is upset he missed out. If he enters and loses, he is upset he gave back profits. This back and forth continues to build, and again leads to cherry picking trades as he believes he can identify w
There are many hindrences to developing the probability mindset, and it would be easy to write an entire book dedicated to them all. However most of these issues fall into four broader categories; fear, false beliefs, trading the "now moment", and edge execution. In the following paragraphs we will touch on these key issues and simple ways to address them.
Fear
As humans we all experience fear throughout our lifetime and so much so the "fight or flight" response has been genetically enbeded into our DNA. Many traders believe they will natuarlly be able to “trade as a computer” after X amount of practice or experience. They assume these components of human nature will eventually give way and soon they will be able to trade without fear or emotions. There is a problem with this theory. We are not computers, and never will be. We are human, which means we are susceptible to emotions and fear responses that are built into us. We are also far from perfect, and full of mistakes, furthering us apart from computers. With this said, it is extremely unlikely a trader will be able to over-ride his natural insticts without slowly and gradually changing his way of thinking first. The best way to overcome fear is through exposure in small doses. For example someone who is afraid of heights, is not taken to a fifty foot cliff and forced to jump off. And he surely does not overcome this fear spontaneously, or naturally after any period of time. Instead he is slowly exposed to heights and as he gets comfortable, taken to increasingly higher points. He may jump off a ten foot cliff, then twenty, and so on until he reaches the fifty foot cliff and jumps off. It is important to realize his fear was never removed completely, but rather he was able to cope with the fear and still jump. This model can be applied to trading, whether it is slowly building a position size, executing an edge every time it is present, or getting comfortable being in the market with looming uncertainty.
Fear can often be debiliating, and is a major hurdle to overcome when transitioning from an amateur to professional trader. The most common result of fear is "anaylsis paralysis" where a trader is unable to make an action due to information overload. There are many different types of fear that occur while trading. Fear of failure, success, missing out, leaving money on the table, and mistakes, just to name a few. It is normal to feel uneasy when putting on a trade or while in a position. The problem lies within hesitation when fear prevents you from entering an otherwise reasonable trade, or any other necessary market action (take profits, cut a loser, hold longer, ect). If you find yourself not entering a trade, there are only two reasons why. First, the trade does not meet your edge criteria, which is a completley valid reason to not enter a trade. The second which is a problem, is fear. When a trader stops entering trades meeting his criteria due to internal fears, he begins to cherry pick trades, and skews his traders equation. This can mean the difference between a profit and a loss at the end of a series of trades. Understanding and recognizing fear within yourself and the market is vital to profitable trading. Awareness of fear within yourself is the first step to overriding and correcting it. And recognizing fear in the market is often a good opporunity to position a profitable trade. It can also be helpful to realize fear only exists in terms of one's ego and is not actually real, only percieved.
Using "Halfsky" position to overcome fear
Many traders experience fear and hesitation after a series of losing or winning trades. When he passes on a trade which works, he is upset he missed out. If he enters and loses, he is upset he gave back profits. This back and forth continues to build, and again leads to cherry picking trades as he believes he can identify w
