Can you believe that we are already a fair ways into 2016? It feels like just yesterday that the calendar year turned over. What New Year’s resolutions did you make to become a better trader this year? Did any of them involve your trader psychology? If not, maybe they should have.
It is common to set financial and productivity goals and to completely forget about what generates financial success and productive results. It all has to start with you. How you handle yourself is at the root of your success or failure.
Maybe this year you made the resolution to make a certain percentage return, or to earn a certain dollar amount through binary options trading. Or perhaps you decided to increase the amount of time you dedicate to trading, or to fund your account with a larger bankroll. Perhaps you decided to try a new trading method or several.
Whatever your other resolutions, they will all fall flat if your psychology is not at the level it needs to be at. In fact, that is exactly what happens with most New Year’s resolutions, whether they involve trading or not. Think about it for a moment. How many people do you know who have ever kept their New Year’s resolutions? Whether we are talking about dropping twenty pounds, exercising more, or spending more time with family, people break resolutions all the time.
That is why I think that your #1 resolution this year as a trader should be to make the changes to your mindset that you need to give yourself the best shot at keeping the rest of your trading resolutions.
To that end, here are 7 ways that you can get a better handle on yourself this year.
1. Lose your fear of losing.
It may sound counterintuitive, but one of the worst things you can do as a trader is build up a mountain of dread around the idea of losing. Yes, you want to win as much as possible at trading, but that does not mean that you should obsess about every loss.
Why not? There are a couple of reasons. Firstly, you are going to lose trades on a regular basis, even if you have an awesome win percentage. Say you win 90% of the time—a stellar (and for most traders, unreachable) win percentage. Every tenth trade (roughly) is one you will still lose.
Do you really want to freak out every tenth trade? If you do, you will destabilize your psychology for no reason.
Traders find all kinds of excuses to sabotage their success, and turning every loss into a disaster is one easy way to do just that. Doing so makes you constantly second-guess yourself and your trading tactics. In fact, many traders continuously pursue changes and improvements they really do not need to make. In doing so, they actually compromise the stability of their systems and end up losing even more trades and then wondering what happened.
The biggest problem with a terror of losing however is that it often points toward (or leads to) pride. I am not talking about the good kind of pride where you are pleased with your accomplishments. I am talking about the dangerous kind of pride. If you define yourself as someone who always wins and must win to be counted as a successful and worthy person, you will constantly end up getting down on yourself every time you fail to live up to your own sky-high expectations.
Allow yourself to fail now and again, to lose a trade, to make a mistake, and still define yourself as a good trader. So long as you are a profitable trader, you are a successful one. You do not need to be perfect, nor can you ever actually succeed at doing so. Plus, mistakes are things you can learn from, but only if you acknowledge them and accept them first. Failure can make you a better trader if you use it as a foundation stone for learning!
2. Celebrate your individual quirks instead of suppressing them.
If you know a lot of other traders—or even if you do not—odds are there is some model in your head for how a “winning” trader should function. We all have some kind of mental image that we are constantly trying to mirror in order to succeed. Maybe you know a guy who makes $100,000+ each month trading, and you want to be just like him. Who can blame you? He’s rich.
But you are not that guy, and his habits may not pay off for you at all. Remember, he has an entirely different life situation, a different lifestyle to go with it, and a different disposition as well. His goals may not be exactly the same as yours. He may have an entirely different plan for his money once he makes it than you do. And his trading personality could be far removed from yours.
The point here is that maybe you have spent the past year trying to do everything just like somebody else. You have been struggling to learn technical analysis, because it is what a successful trader you know does. You have been fighting to trade 60-second options, because it is what he does. You have been rolling over your trades because he does, and none of it is working out.
But that may be because none of those things are a good fit for you. You would rather trade price action and stick with long-term trades and get out at the expiry each time. The “why” does not really matter—what does is what pays off for you. If you find you are more comfortable and profitable trading your own way, do it. Never mind that you are not a millionaire yet. No one has to walk in your shoes but you. Nobody has faced your challenges except for you. And chances are good that if your rich successful trader friend tried to, he would fall flat on his face.
3. Have a system.
Are you one of those traders who say, “My system is having no system?” A lot of traders maintain this argument for quite some time. They assert that their creativity and free associative abilities will be compromised if they start following a lot of hard-set rules.
But following no rules is never going to make you any money.
You may wonder why this is a psychology issue at all. But it is one at its very heart. There is a reason that you refuse to trade using a system, and it has nothing whatsoever to do with being profitable. The reason I know that is because no one can stay profitable over the long term without some kind of method to guide them, to bring order to chaos.
So the question is really why you are still not using a method. The answer usually comes down to either laziness or intimidation. Either way, the only way you will ever become a successful trader is by getting a system, so you will need to address whatever it is in your psychology that is holding you back. No matter what it is, if you really want to make a living as a binary options trader, you can do it. Even laziness is something you can overcome. Do not be ashamed to admit it if that is what is going on. It is really common! Just start working toward moving past it.
4. Simplify your trading plan and method.
Just as there are a lot of traders who enjoy saying “my system is having no system,” there are others who love to say that complexity “works for them.” They have a dozen indicators on their charts, they look at every timeframe under the sun, and they trade about two dozen assets. They have a hundred steps to take in planning any trade.
These types of trading methods may sometimes work, but on the whole they are much harder to manage than simple systems, and they usually do not generate results which are nearly as strong or consistent. The indicators give too many mixed signals, the timeframes likewise, and the assets are too hard to follow. Traders actually get distracted by the sheer amount of noise in their charts and steps in their plans. As a result, their thinking becomes muddied.
This is another issue that would be easy to slot under technical problems. After all, it is a technical mistake to make a complex system, isn’t it?
I believe this is also a trader psychology problem. If you have a mega-complicated trading method, you need to stop and ask yourself why. Why do you feel the need to look at a thousand indicators and assets? What is it that causes you to resist something simpler?
There are probably numerous explanations for why traders lean on these types of systems, but here are a few possible motives:
They are scared to fail, and feel like they need a million indicators “proving” that they are right to take a trade before they move forward with it. If they do not get confirmation from every direction, they freeze.
They believe that more complexity necessarily means “better” or “smarter.” They are trading largely for reasons of ego, and the more indicators they can use, the smarter and more competent they believe they are. They feel like simplifying their trading would dumb it down.
They are using their indicators as a shield against action. They are so afraid of trading that they are just looking for excuses not to pull the trigger. A dozen conflicting indicators make for a pretty solid excuse—so it would seem.
You can see how all of these reasons have trader psychology at their root. They come down to the fear of failure, the fear of action, or the need to prove something. As I mentioned earlier, fear of failure can be a big psychological roadblock on the path to success, so it is well worth dispensing with. And once again, you can see how pride can also stand in your way.
5. Stop waiting for things to go wrong before you work toward new trading insights.
I have been making the assumption that you are struggling with your binary options trading in this article for the simple reason that most people do struggle for a long time before they start doing well.
But maybe you are doing well with your trading. You have struggled for years and now it is all finally paying off. You are at last raking in the incredible profits that you always dreamed of. Your account balance is growing day by day, and you can finally relax for a little bit and enjoy the rewards of your hard work.
By all means, if you need to take a well-deserved breather from that intense work, do it. In the long run, that will actually help you to maintain your discipline, so long as it does not turn into a permanent thing.
But that is a very real temptation! After a while, it is easy to become comfortable taking advantage of that much-needed break. Things are still going swimmingly, and you just do not feel ready to jump back in yet. “Next month I will run more tests,” you think to yourself. “Next month I will look for new ways to innovate.”
And then the next month passes, and the next, and the next, and still you are sitting there doing nothing. You are still profitable, so you think to yourself, “What is the point in worrying about the future? I am doing just fine.”
Maybe you never have to grind quite as hard as you did back when you were first starting out, but you do need to get back to work eventually, and when you do, it is best to do it on a regular, predictable schedule. It is challenging to balance your commitment to innovation with the need to rest and to appreciate what you have.
For that reason, you should come up with some kind of a schedule for testing new strategies as well as adaptations to the existing systems you use. Decide how many new strategies you will explore each year, how many you will test, and so on. Come up with a weekly schedule for researching and ongoing education. Stick to that schedule regardless of how you are doing with your trading.
Ultimately, learning and innovating should not be tied to fear of failure—they should be tied to the opportunity to build on your success.
6. Balance pride and humility with gratitude.
One of the biggest psychological challenges you will face as a trader when you start becoming successful is knowing what to do with your pride.
Pride can be a good thing or it can be a bad thing depending on how it balances out against your sense of humility. You should be proud of all that you have achieved through your hard work and discipline. But you should also remember that you can never outwit the market, and you are never infallible. You can and will continue to make mistakes in the future.
One of the best ways to keep from turning pride into outright conceit is to balance it out with gratitude. You are where you are in large part because you did the work to get there, that much is true. But you also probably owe your success to a combination of luck and the help of others.
Be grateful for the assistance you have received on the path to your goals. Also be grateful that you have the mind you need for trading, and the will to persevere and keep moving forward when things get tough. Be proud of your achievements, but grateful that you had the chance to make them.
7. Balance your life.
No matter where you are right now in your trading career, there is a good chance that you devote a huge amount of time to your trading. This may be true if you are a total newbie, just getting into binary options trading for the first time, or if you are a veteran who has been in this business for years and has a huge successful trading account.
Trading can easily devour hours a day, and can turn into a second full-time job. When you are juggling that with a day job, you can find yourself with little time for anything else.
So many traders fall into the trap of believing that they must “give it all” for the sake of their trading. “I will succeed at this at any cost” sounds great and dedicated, but eventually that cost will materialize as something very measurable. If you give it all, what you end up giving may be your day job, your family, or your physical or psychological health.
The thing to remember is that if you do that, there will ultimately be no trading career either. Everything starts with a firm foundation of physical and psychological well-being. For that, you need a balanced, healthy life. So make a decision in 2016 to balance your commitments. That may mean giving up some of them and putting a fresh emphasis on others—whether they relate to trading directly or not.
If you can make even one of these 7 improvements to your trading psychology this year, you will be on target for a much more profitable 2016. While you are at it, be sure to check out 8 New Year’s Resolutions for Managing Your Money in 2016!