Trading Mentality Of A New Trader, in my opinion, has three components that must be managed correctly in order to be a successful trader.
Risk management, system management, and mental management are all things that need to be considered.
Majority of Losses
I believe that almost most of the 90% of traders fail. They fail because of their own minds, not because of their system or risk management. This includes both professionals and retail traders. There are plenty of profitable systems out there. Risk management should be as simple as math. It comes down to discipline, self-control, and perseverance to make it as a trader, yet so many people fail.
Emotions in Trading
Stress, ego, arrogance, stubbornness, fear, greed, and emotional instability can all ruin a trader’s mind. These factors contribute to poor decisions that cause so much emotional and mental suffering that people simply give up. In their first year, the majority of new traders decide that trading is not for them and quit.
Trading Mentality Of A New Trader is that they give up for emotional and mental reasons, not for mathematical or logical reasons. Trading for a living too soon can also be disastrous for those who do not understand that traders are entrepreneurs, not employees. Day trading, or watching every price tick all day, can be exhausting and demotivating for many new traders. Traders should safeguard their mental and emotional well-being just as much as their financial well-being. New traders must learn how to trade a profitable system. They should never put their net worth or lifestyle on the line for a single trade or series of trades. Instead, they should be able to look down on their trade with a clear head and not have their self-worth tied to the outcome.
You Are Not Alone – Never Give Up
Many legendary traders, such as Dan Zanger, Jesse Livermore, Nicolas Darvas, and even Alexander Elder, have come back from ruin, losing their entire personal accounts or at least half of their initial investment. They didn’t have any trouble returning and trading again with perseverance to win big in the long run. If you believe in yourself and have the perseverance to stick with trading, you can always get more capital.
When you lose faith in yourself, you have a problem. You believe that trading isn’t worth the time and effort you put into it because the markets are too difficult. Trading too much, trading too big, and starting your trading before you’ve done your homework will give you a negative first impression of what it’s all about.
Ready Before Trading
You can calculate the time, effort, and capital loss in the beginning and decide that trading is not a good path for you. You can then exit the markets and pursue other interests. I’m sure doctors and lawyers face the same decision at the start of their careers. As they consider the next ten years of their lives and realize the price they’ll have to pay not for success, but for entry into their field. For ten years, they will work to educate themselves.
Trading is no exception; you must pay the admission fee. Always keep the goal you want to achieve in your mind to give you the energy and motivation to get through those days and those losing trades that seem to be screaming at you to give up. Always try to hold on tightly to the image of the prize that you are pursuing: freedom, independence, leisure time, a comfortable lifestyle, and victory.
Bottm Line (Trading Mentality Of A New Trader)
I focus on the 1% rule for capital loss per trade. Finding a method that fits a trader’s beliefs and personality so that they can make it through their first year of trading. All new traders should at least try it out for a year before deciding whether to put in the time or pursue other interests rather than being mentally scarred from trading by being run over by the bus that is the markets.