When people start trading, the first question they ask themselves is: “what should I trade?” For the beginner, this is the wrong question—the first question should really be: “Who am I?”
Trading is Knowing Yourself
We tend to see something we think is exciting and say “I want to do that!” But a little reflection can do a long way. Know yourself, know what you are good at, know how you really think, and most of all know, know what your actual limits are, not the ones you just want to be true.
Unlike most other professions, trading requires you to be brutally honest with yourself. In other words, you can’t lie to your own brain—it already knows what you mean, or what you are thinking.
Does Your Mood Affect Your Trading?
In many jobs, it might be easy lie to everybody around you and tell them, for example, that you are having a great day, even when your day is not going well. When you go back to your office, your work may be mediocre because of your true mood, but, at the end of the day, you still have a job and you still get a paycheck.
When you’re a trader, that usually doesn’t produce the same results. When you are in a bad mood and you are trading there are many more potential consequences? Not doing your best work may translate into losing a lot of money—which may in turn mean something worse than no paycheck.
Maintaining Focus While Trading
In trading, if you need ten different pieces of information to make your decision, and for a split second, your mind thinks about the fight you had with your significant other that morning, you get distracted. If you forget to fully consider just one of those ten pieces of information it could be the difference between making money or losing money on your trade. In a normal line of work, you don’t have to be at 100% all of the time, you can have off days – even decades – but if they do just enough to get by they can maintain their livelihood.
Trading will not let you do this. When you trade you can’t “kind of” make money or “kind of” lose money. In trading, if you keep saying “I will do better tomorrow,” it won’t be long before you run out of money. You can say to yourself “I almost made money today, if I would have exited the trade 1 minute earlier”—but that’s not the reality. The reality is you lost money today, and the next question has to be “what did I do wrong, and how can I fix it so I don’t make that mistake again?”
Great Traders Are Self-Aware
Moreover, self-awareness as a person and trader is essential. You have to know and acknowledge your strengths and weaknesses to be successful. You cannot become a great trader just by trying to convince yourself that you are a great trader. There cannot be any doubt: you must believe and trust in your powers and limitations. Then you don’t have to convince yourself of anything. You are trading as “you”.