Four Factors for Self-Confidence in Trading

This is one of the things I hear from traders all the time. If I could just feel more confident than I know that I would trade better. So I thought today in Trader Tip Tuesday, we would talk about four factors that would help you have more self confidence in your trading.

The four factors we're going to discuss today are strong trading fundamentals, sense of mind awareness, sense of body awareness, and focus of concentration. Lets start with strong trading fundamentals. Self-confidence is really about our aptitude or our ability to complete a skill. So if we want to have self-confidence in our trading, we have to have confidence in our skill. So the best athletes are over-practiced. They have over-trained to learn their fundamentals such that their fundamentals are just natural, their instinctive, they don't think about it, they just do it. Trading is similar. We want to overtrain, we want to prepare ourselves by overlearning our skills, over overlearning our fundamentals. So we need to develop strong trading fundamentals. So how do we do that? Well, one, we utilize the 10 tasks of trading, which I'll do in a later trigger Tip Tuesday, but we want to be consistent, have routines and processes for preparation, for execution, and for debriefing, such that we are consistent every day, every week, in how we perform these functions. Then we need to practice our skill. I want you to think about something, think about a pro golfer, does a pro golfer just go to the tournament and play on the course? Think about a pro basketball player, does he just show up for game day and go play on the court? Or when he practices, does he just play five and five up the floor? No. They practice specific skills. They always have a specific objective of what they're trying to accomplish in every practice session. So for the basketball player, he may work on three-point shooting and take three-point shots from different spots on the floor. Some of them off the pass, some of them off the dribble, some of them off the move. Then he may go work on his ball handling, and work on dribbling the ball up against pressure, splitting double teams, creating space, protecting the ball. He may work on finishing at the rim, finishing with his right hand, finishing with his left hand, overhand, underhand, reverse off the backboard, over the front of the rim, dunking. You get the idea, breaking it down into simple fundamentals that are repeated over and over again, he doesn't  just go to the court and play. But what most traders do? They sit down at the desk, they turn on their computer, they grab their mouse, and they start watching market data and they start watching charts and they go trade, it's the same way as walking onto the court without practicing or going to the course without going to the range. 

Just the same in trading, we need to break it down into simple fundamentals, simple elements. So we have a pattern that we like, we go over the entries, we go find 30 or 50 entries. We go back and do this. We do it on simulators, we run backtests, we do the same thing with our exits. We go through and we find 30 to 50 exits, we backtest these, we put them in simulator, we go back historically and look through, go bar by bar by bar by bar, finding our exit. These things all train our brains such that when we go and we actually trade, it's automatic. So we document our trading plans so we know what our rules are, not in our head, but on paper and then we record all of our trades, including what we call metadata, which is all these different aspects of our trade. So that we can go back and we can review our trades for patterns in our execution, patterns in how we manage our trades. These create strong trading fundamentals. Now of course a lot of people don't want to do this and then they wonder why they're not good traders. Just show me how to make money. So just show me how to win the Masters or show me how to play in the NBA, it does not work that way. We have to put in the time, to put in the effort. We have to have the consistency to learn strong trading fundamentals. 

Now once we have strong trading fundamentals, that will give us confidence, but there's more to this. Now we're just getting started. Without the fundamentals, we're screwed. We cannot mentally masturbate our way into success any other way. We have to have strong fundamentals, but once you have strong fundamentals, we can move on to the second aspect, which is the sense of mind awareness. Sense of mind awareness is being able to pause and be aware throughout the trading day. Where is my mind focused? Is my focus on my insight? Is it my inner thoughts? Am I focused on what I see around me? Am I in the past, thinking about something that happened to me in my past trade or how I lost money two weeks ago? Am I in the future, thinking about all the money I'm going to make on this trade? Thinking about the new house I'm going to buy with the money I make from trading? Where am I in the present? Where I see the market right now, as it truly is. Am I wide or fine focused, am I focused on individual bars, or am I wide focus where I'm taking in multiple inputs at one time? Maybe I'm listening for an audio alert while I'm looking at a chart or talking on the phone, or talking to somebody about a trade I'm making, being able to process multiple inputs of information simultaneously, wide focus, fine focus. Then which senses are in play, am I visual, am I auditory, am I body kinesthetic or body awareness? These are the three primary areas of feeling with visual being the big one, but it depends, some traders I know are auditory, they're not visual at all. Some traders are very body kinesthetic, and they're not the others. They feel things, they hear things, they see things. I'm very visual, and body kinesthetic. I'm very low auditory. If I'm trading and you're talking to me, I may not hear a word you say. Then we have secondary senses, which are smell and taste. Interestingly enough, smell and taste create the strongest memories. They really anchor the mind, but they're not the primary sense that's usually being attracted or turned on. It's usually visual, vision, auditory, or body kinesthetic. So where are we this gives us an awareness of where we're processing information, we want to be in the present, we want to see what's going on. 

Then we moved to number three, which is body awareness. So body awareness is if other things are off. So we need to have fundamentals, we need to focus on the right modality and then once we're there, then we need to see, are we over aroused, just right or under aroused? If we're under-aroused, we're going to be slow, we're going to be lazy, we're not going to process well. If we're over-aroused, we're going to be way too tense and to hyper and we're going to make rash decisions or we won't be able to think at all because we're too jacked up. So what we're doing is we're sensing, is there tension in the body and is there tension is certain part of the body? When I get stressed, my stomach, the upper left side of my stomach and to the left of my belly button knots up, literally knots up. So I can slow down and feel, if I feel tension in my stomach, I know I'm too stressed. I can breathe deeply, I can focus on that area and I can literally feel it release. So I want to be at that right level, not over aroused, not under arouse. 

This brings us to number four, number four is big. Okay, so we have strong fundamentals, we have an awareness of where our focus is going. We have an awareness of the tension in our body, so that we're in a peak state and now we come to what is their focus of concentration? What are we focused on in the moment for our outcome? We can focus on what we can control and we want to avoid focusing on outcomes we cannot control. When we focus on outcomes we cannot control, this creates anxiety and we have difficulty concentrating. This is when we make poor decisions because we're no longer looking at the market for what it is, we're trying to impose our will upon the market. If we're trying to say I need this trade to be a winner, or I want to have a winning week this week, I need to make 12,000 bucks this week. We start thinking these things we add pressure to the trade and by adding pressure to the trade, then we fill with anxiety, we get over aroused and we underperform or we get filled with anxiety and we withdraw and we don't even want to see it and then we have a trade on that we're getting killed on and we won't even look at it because we're like too attached. Too attached and filled with anxiety, I can't even look at it. 

Instead, what we want to do is want to focus on what we can control. What can we control? Our processes. Are we executing our process? Are we executing our pre trade checklist? Are we executing our monitoring protocols to know when we should be in the market? Looking at our trade? And when we should be out? Am I documenting my trades? My documenting my metadata? Am I doing my debrief? Am I following my rules? Do I have my trading plan out where I'm looking at my rules, and I'm like, Okay, this is what I said, I'm going to do, this is what I'm going to do? Focusing on the process, focusing on execution, that we can control. We can be consistent in following that trade after trade after trade. We can control our effort. We control when we show up, when we leave the desk. Our focus we are when we are on the desk and at the end of the day, we could look back and go I followed my rules. I did everything in my processes. I was fully present and I did my best. If I have that attitude, in the long run, I'm going to make a lot of money. A lot of money. If I'm focused on Well, how am I going to make money today, and I need to make $4,000 and this trade better not be a loser, or I'm going to go over five today. This totally messes us up and makes us underperform. 

Just review the four factors, strong trading fundamentals, no way around it. The sense of mind awareness, to know where we are putting our focus. Our sense of body awareness, sensing tension in the body, and then our focus on concentration, focusing on the process, not the outcome. We do these four things, we will have self-confidence, and we'll be able to be repeatably consistent. If you're able to be repeatably consistent, you're going to make a lot of money. Stay tuned every Tuesday, just like today, where I come to you and share tips with you like today that helped take you in your trading to an elite level. Have an amazing week. I'll see you next week.