Wednesday, November 15, 2017

Do You Expect to Win? | Trading Psychology

Today’s Trading Psychology question of the day…

“JJ…I’ve been learning to trade for a few years now, and one of my biggest problems is that I do a lot of prep work before the day begins, to the point where I am too aggressive with my trading and I often lose money.  I’m starting to think that it’s better for me to just wake up and trade what I see, rather than doing hours of work beforehand.  Any advice?”

Wow… this is an awesome question!  Here’s another question…

“Are you so prepared for each day that you expect yourself to win?  Is that causing you to focus on the profit, rather than the process?  Are you over-preparing because you’re actually scared of the fact that you don’t have any control over what the markets do?

Is it possible, that with all of your preparation you do before the opening-bell that you find yourself in a position where you almost feel “entitled” to make money that day?  And if you don’t… does it all come crashing down when you lose money?”

Boy… I definitely know that feeling, I’m the same way.

I remember learning to trade many years ago, and like a lot of traders, I would get up a few hours before the opening-bell, do a ton of prep work, and have a great plan of exactly how I was going to trade that day…

…then the opening-bell rings, the market reacts differently than I predicted, and I take a foolish trade right out the gate because I thought I was prepared for everything, but in reality, I didn’t have a clue what I was really looking for.

You know…trading is one of the most challenging jobs because we’re forced to operate in conditions that we can’t control… and that’s tough on our emotions. 

The markets don’t care who we are…

The markets don’t care about the amount of money we have, the fancy diploma on the wall, or how much success (or failure) we’ve had in other aspects of our lives. 

The markets don’t know us, but the markets determine how most of us feel when we’re trading.

We feel like the king of the world when we’re winning, but we feel worthless when we’re losing.

I discovered a lot about myself in the first year of my trading career. 

For example, I discovered that I was obsessed with having CONTROL over the results of my trading.

I was a great student in school, I got good grades… had plenty of friends… life was pretty simple.  Invest the hard work and you’ll be successful.  For me, 2+2 was always 4, and that never changed.

Then I tried day trading… and all of a sudden 2+2 didn’t always equal 4, and it was painful.

It took me a long time to understand that no matter how hard I worked, I would never be able to control what the markets do each day… the only thing that I could control were my own actions.

As a human being, I thrived on controlling my surroundings, but as a trader, I had to understand that the markets don’t work like that.

And a wise trader once told me… you need to learn to play the game, or get played by the game, because you’re not going to change the game.

·        So how do we avoid that obsessive attempt to control the markets? 
·        How do we avoid the feeling of entitlement? 
·        How do we invest the time in our trading without getting over-confident?

My best advice would be… focus on preparing for specific situations, rather than preparing for everything.

I would recommend you master 3-5 specific trading situations, so that you don’t need to learn EVERYTHING about the markets, you don’t need to prep for hours before you trade (you can if you want to), you just need to know exactly what you’re looking for, and when it shows up on your charts, you can take advantage of that situation.

Think of it like playing baseball…

If you’re at the plate, and the pitcher is down in the count 3 balls and 0 strikes… you KNOW you’re going to get a great pitch to swing at… so you’re ready!  A good hitting coach will make sure you’re prepared to swing on the next pitch because that specific situation is something you need to be prepared for.

Or in the markets… you see a strong move higher, a ‘2-legged pullback’ to a naked reversal-line, seller-failure at the moving-average and a beautiful signal-candle to trigger the trade.

That’s the type of detail you need to be thinking here… let’s find 3-5 specific situations that happen often so that if you’re like me and you want to obsess about something, obsess about THAT, not everything else.

What’s Your #1 Trade Set-up?

Here’s an exercise for you… close your eyes… picture your #1 trade set-up… that trade set-up that almost always works for you.

Close your eyes…can you see it?  Can you see the chart structure?  Can you see the pattern?  Can you see the entry trigger?  Where’s your stop?  Where’s your target?  Close your eyes…Can you see it?

Successful traders can rattle off a handful of these specific situations because they have been watching real-time charts for a long period of time.

If you can’t close your eyes and picture that specific trading situation, then you have some homework to do.

If you’re someone who tries to control the situation by investing hundreds of hours in prep work, knowing all the indicators, all the different markets, you’re creating an unrealistic situation for yourself.

Do you really think you’re going to learn EVERYTHING about the markets?  Do you even need to?

Just like a baseball player doesn’t swing at everything, traders have to know what they’re looking for too.

Don’t obsess about everything, focus on those specific situations because that is what you can control.

Go back and study the specific opportunity itself, study the 30-minutes before the opportunity occurred, study the exact time of the trigger, and the hour after it happened, etc.

The best traders in the world have a mind that knows 3-5 specific trading opportunities, and when they see them on their charts, they respond with confidence.  That’s all they can control; the rest is up to the markets.

Rookie traders have work to do… they need to either work with someone who has experience and can show them how to find these opportunities… or they need to get comfortable chair and invest the time to watch live price-action every day possible until they find the trading opportunities themselves.

It took me over three years to learn that lesson, and honestly, im still mastering new trading opportunities every day, and so will you.

Remember, we all want to control our trading, and many of us do obsessive amounts of prep work in an attempt to impose that control over the price-action, but the markets don’t operate like that, so we have to focus on what we can control.

Your job as a trader is to master 3-5 specific trading opportunities.  You should be able to easily describe every detail about them… and if you can’t… you know your homework… you have to find them!

And if you’re like me, and you love to go head-first into whatever you’re doing…

If you want to obsess about your trading, obsess about those specific trading opportunities, obsess learning to anticipate them before they happen, how to structure the trade to manage risk, how to manage the situation properly, and where to take the most effective profit targets on the trade.

Added Bonus = Patience

Once you have your first specific situation nailed-down, you can then rely on those trades for your profits each week…

…and when you find your SECOND specific situation… you’re adding to your income, so on and so forth.

And one added benefit of all this… as you master more specific situations, you’ll find yourself with a higher level of patience, more confidence, and trading will become a lot easier on your emotions.

So… rather than trying to be ready for everything, focus on learning those 3-5 trading opportunities, so that you can stay patient waiting for them, and have confidence trading them when you see the opportunity on your chart.

Guys… I hope you found value in today’s trading psychology lesson…

…and I would love to hear from you about additional topics that you’re struggling with as traders.

Do me a favor…drop me a comment below this video with any topics you’d like to see me cover in my trading psychology video…

…make sure to give me a thumbs-up if you found value, and share it with a friend who can benefit from this information as well.

It doesn’t matter what market we trade, or the strategy we use, even the best traders battle with their emotions when there’s money on the line.

And don’t forget, you can find me every morning @ 8:00am EST in my trade room with all of our members here at, I have a great free trial on the homepage of our website, I publish my Nightly Newsletter every evening on my blog before 8:00pm EST, and I’m excited to see you again soon on my next trading psychology lesson.

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  1. Your daily trading psychology video's are awesome. They really add to the value of your trading school. Just like you explained in todays question what I have learned from you is if I have all the horizontal support and resistance levels and trend lines drawn out before hand but the price action of the micro cycles and the signal and entry candles don't trigger then I don't take the trade. Before I would have blindly entered the trade just because my prep work told me to.

  2. Your trading psychology videos are terrific and extremely helpful as is all of the teaching you do. Trying to learn everything just leads to information overload and mental exhaustion which does not promote successful trading. I am going to apply your idea of mastering 5 trade setups to apply in my trading. This will help with focus and triggering the appropriate entries and exits. Thank you for your kindness in sharing your expertise with others.


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