Trading Psychology 2 How Strong is your Trading Mentality?
Signs of an "Amateur Mindset"
If you identify with any of these characteristics while trading, you are suffering from an Amateur Mindset. These are normal when first learning how to trade, and even common in advanced traders who have not yet mastered their . Very succesful traders may still occasionally experience some of these symptoms while increasing positions, but as far as day to day, do not.
Hesitation to enter positions meeting edge criteria
Fail to exit trades not performing to expectations
Feelings of fear (missing out, failure, success, leaving money on the table, etc.)
Upset/mad when prices go against you or happy / relief when prices go your way
The market is too painful to watch (pain avoidance)
Market actions led by emotions / feelings / stress
Forms and applies rigid rules for entry / exiting market
Afraid to make mistakes / upset after mistakes
Signs of a "Probability mindset" or Professional Trader
Enters or exits trades without hesitation
Does not experience internal conflict while entering, or managing trades
Willing to take a loss (accepts his risk)
Flows with the market seemingly effortlessly
Not attached to outcome of any trade
Emotions / stress do not lead to market actions
Enters / exits however necessary
Accepts mistakes and moves on
Interestingly, it is easy to separate a professional trader from an amateur, not based on profits or losses, or the amount of ticks he makes a day; but based on his actions in the market. By observing how a trader interacts and engages with the market it is obvious if his actions were led by emotions or intuitively based on what the market told him to do at the time. Professionals flow with the market, and do not fight or resist it in any way. As a result money seems to flow effortlessly into their accounts, and their equity curve is that of a healthy bull trend. Amateurs are constantly fighting the market and themselves, with actions led by what they think, perceive as a threat, or the false belief that they know what is going to happen next. The outcome is a slowly depreciating account balance, and an equity curve that is flat or in a bear trend. The later is a sign of trading errors made by the trader and not that of an edge being executed properly.