What makes an F1 racing champion? Is it the car? Is it the technology that went into building the engines? No, it is the driver. The driver’s confidence around corners and patience in the face of daunting challenge by other drivers makes a champion private key wallet. Similarly, it is the trader that makes the difference in stock and option trading. It is the stock or options traders’ confidence in their chosen methodology and their patience in the face of daunting price changes that makes a champion stock or options trader.
Trading confidence is a mental confidence banking account in every trader and trading discipline determines if you deposit or withdraw from it. Trading confidence is what enables every stock and options traders to execute trades according to their chosen methodology confidently and to stick to the game despite losses knowing that they will eventually make more wins than losses.
Trading confidence is a banking account which you can either deposit to or withdraw from. Each time you lose money, you withdraw from your trading confidence and each time you make money, you deposit to your trading confidence. When your trading confidence is zero or bankrupt, you will find yourself hesitating before every trade while imagining the pain if the trade turns out a loser again.
You will have sleepless nights and will rush out of trades at the very first sign of danger, making unnecessary losses. When that happens, it is the time to go back to paper and re-examine the way you have been trading. In fact, you do not have to break your trading account balance to have your trading confidence bankrupt and a bankrupt trading confidence always lead to a bankrupt trading account. Conversely, every time you win money with your chosen methodology, you deposit to your trading confidence bank, feel confident and happy when placing trades and do not panic when trades go bad.
A major determinant of your level of trading confidence is the amount and nature of money that you have to trade with. The more money you can afford to lose, the higher your initial level of trading confidence. Stock and options traders whom can afford to lose only very little money would usually have very low level of trading confidence as every loss takes a significant bite out of their trading confidence bank.
Again, you need not lose all your money to lose all your trading confidence. Some stock and options traders no longer feel confident enough to trade when their account go down by 30%, while some reach that level of confidence bankrupt only when their account go down by 70%. The nature of money you have to trade with also determines your starting trading confidence.
If you are trading with excess money which you do not need, then your level of trading confidence would be very high. In fact, your trading confidence could still be high even if you lose all that money. Conversely, if you are trading with borrowed money which you need to pay back in installment and with interest, your trading confidence would be extremely low as every loss makes it harder for you to pay the money back.
Traders from all around the world have been feeding me a steady diet of questions over the years, and they seem to be getting more and more concerned about what the future holds. Many people just like you are just trying to survive in today’s markets, and they don’t know what to do.
If more people traded in line with these plans, not only do i think more traders would be surviving today’s markets, I think they’d be prospering. What you are about to read is more valuable to you than what you will find in many trading courses that you’d have to pay for.
The Dependent Trader: This type of person is usually looking for the easy way out, looking to make a quick buck, or wants to strike it rich. They think it’s possible to “follow the crowd”, blindly place trades pumped out by a system that “can’t lose”, and quit their job. The bottom line is that this type of trader is dependent on someone else for their financial success – forever, for life. Yes, The Dependent Trader can be successful with this attitude, but I believe the odds of success are low (probably around 5%).
The Independent Trader: This type of person wants to have as much control of their financial destiny as possible. They understand that when they know how the markets work, they’re empowered to place informed trades without having to rely on someone else. Someone who is an independent Trader knows they are maximizing their odds of success in the markets, which can make their financial and lifelong dreams come true that much more quickly. The bottom line is that this type of trader holds the keys to the kingdom, and has control of their financial future for their entire life, no matter what happens.
The prevailing view of the Financial Media Stars, back in April, 2008 might have been that the financial related stocks (including the bank stocks) have bottomed out and are on their way up and that the worst is over for these companies. And so blasting over the airwaves are almost emotional appeals to “Buy, Buy, Buy! ” the bank stocks including Citicorp.
Now on this recommendation, Citicorp initially moved up a few dollars but then abruptly stopped in its tracks and began a long slide down, dropping another 50% from the April, 2008 highs to the July, 2008 lows. At that point, it was obvious to one and all that buying in April was not a good thing to do. And right about at that time, in the midst of the July lows, what did the Financial Media Star do? He through in the towel on the financial stocks including Citicorp and said, “Sell, Sell, Sell! ” But it was too late – the damage had been done. So the cry by the media to “Buy, Buy, Buy” Citicorp was too early, and the cry to “Sell, Sell, Sell” came only after a drop of 50% from the April 2008 highs; of course, much too late.
Enter the Independent Trader, who is not influenced at all by what the Financial Media Star is saying, for one thing, because the Independent Trader doesn’t even listen to or know or even want to know what the Financial Media Star is saying. Instead the Independent Trader is guided by good trading methods that he has mastered, that screen for good high-probability, low-risk trading opportunities, with precise setup conditions, entry rules, stop loss protection to limit risk, position size rules, and an exit strategy to exit trades profitably.