Trading in the financial markets can be an exciting prospect. After all, armed with solid instincts and the proper knowledge, a savvy trader can turn one hundred dollars into one thousand dollars within a very short amount of time.
Success in trading depends largely on educating yourself on the rules, behaviors, and quirks of the discipline, as well as researching past key market indicators and trends. It also requires cultivating the right psychological mindsets. In this article, this sometimes nebulous x-factor will be explored and the psychological mindsets needed to succeed in trading will be outlined, accompanied by insights from Matt Choi, a Chartered Market Technician and a veteran trader with a proven and winning track record.
Patience
Patience is crucial in trading. It’s easy to get caught up in the excitement and make hasty decisions, but successful traders know that waiting for the right opportunity is key. Markets are unpredictable, and not every moment is a good time to trade. Choi, an experienced financial professional, trading coach, and the owner and operator of the firm Certus Trading, explains: “Patience is an invaluable trait to hone when engaging in trading. It allows you to wait for the perfect setup, reducing the risk of impulsive decisions that can lead to losses. Beyond that, by its very nature, patience creates the mental space necessary for a person to carefully consider their next moves.”
Discipline
Discipline is all about sticking to your trading plan. A trading plan outlines your strategies, risk management guidelines, and ultimate end goals. That being said, without discipline, even the most well-crafted plan is functionally useless. It’s important to follow your plan strictly, even when emotions run high, as they often do when large sums of money are staked to fluctuating assets. Cultivating discipline helps you avoid the temptation to deviate from your strategy during volatile market conditions. This type of measured consistency is vital for long-term success.
Resilience
Resilience is the ability to bounce back from setbacks. In trading, losses are inevitable. Even the best traders face losing streaks here and there. What sets successful traders apart from their less-successful peers is their ability to recover and learn from their mistakes. Resilience means not letting losses affect your confidence or decision-making, and instead using them as learning experiences to improve your strategies. “There have been any number of examples from my own trading career where, had I not demonstrated resilience, I probably would’ve sabotaged my own investment strategy,” says Matt Choi. “I find it to be among the most important characteristics, both as an investor and an entrepreneur. Certus Trading never would have lasted as long as it has without resilience in the face of adversity.”
Emotional Control
Emotional control is about managing your emotions while trading. Fear and greed are the two most powerful emotions that drive poor decision-making. Fear can prevent you from taking necessary risks, while greed can push you to take excessive risks. Each of these emotions is dangerous in its own way, so the most productive position a trader can take is that of an analytic-yet-emotionless being. In this instance, it might be useful to think of Mr. Spock from Star Trek as the ideal role model. Much like the fictional Vulcan science officer, successful traders maintain emotional control, making decisions based on logic rather than emotions.
Adaptability
The markets are constantly changing, meaning what works to make investment gains today might not work tomorrow. Adaptability means adjusting your strategies to changing market conditions, and it is a crucial mindset to adopt when trading. This includes being open to new information, as well as being willing to change your approach when conditions prompt it. “Successful traders continuously learn and adapt to stay ahead of the market,” asserts Choi, adding, “Certus Trading reviews each and every major market shift as it occurs, then re-evaluates our instruction and courses accordingly.”
The Difference Between Success and Failure
In many instances, possessing the right psychological mindsets can mean the difference between success and failure when trading. Cultivating patience, discipline, resilience, emotional control, and adaptability is just as crucial as learning market technicalities and gathering solid research. Summing up his company’s overall philosophy on investment, Matt Choi puts a great deal of emphasis on the adoption of the five mindsets outlined in the above paragraphs. “By developing and mastering these core traits, traders put themselves in a much better position to navigate the challenges of the markets and achieve their trading goals. Certus Trading’s emphasis on psychology has helped the many traders we coach to enhance their performance and find lasting success in the markets.”