Even as a seasoned trader, do you still face doubts about your trading ability? Does your confidence sometimes waver in chaotic market conditions? As a novice trader, do you feel that more experienced traders never ever have doubts?
Having rock solid confidence as a trader is almost impossible. While there may be some who have attained such a status, they are probably very few. However, it doesn't mean that it's not something that we all want as traders. Who doesn't want to have unshakable confidence in their trading abilities?
What Underlies This Confidence Crisis?
This confidence crisis comes about mainly from a few main fears:
- Fear of losing money
- Fear that your trading system isn't as sound as you hope it is
Fear of Losing Money
As your trading system goes through a drawdown, it's only natural that the fear of losing money can shake your confidence. Ever wonder where the saying "Scared Money Doesn't Win" came from?
When you're afraid of losing money that you can't afford to lose, no matter how sound your trading system is, your emotions get stirred up by thoughts of the implications of losing that money. Even if your trading system were perfectly sound, your emotions can cloud your thinking and impair your ability to trade correctly. And as your ability to execute your system is impaired, you start making mistakes. And as a result, these mistakes create further doubt in your ability to trade well.
Fear That Your Trading System Isn't Robust
Because every trading system, no matter how good, eventually goes through periods of drawdown, it's only natural to worry that your trading system has "broken down". Furthermore, because of the lack of perfect information, which is virtually impossible to attain anyway, you'll never ever know for certain what's going to happen in the next day, or week. Let's not talk about the next five minutes just after entering a trade. That's also a very normal experience that all traders go through whether they just started trading or if they have been trading for a long time.
If you employ a trending system and the markets go into consolidation, your trending system tends to get whipsawed for consecutive losses. If you employ a counter-trend trading system, it will go into periods of drawdown when the markets trend.
Resolving This Trading Confidence Crisis
How do you then resolve this trading confidence crisis?
Top athletes who compete at the very highest levels have very little separating them in terms of physical ability. The main component that separates these top athletes from the others is the mental edge and consistency they have.
To resolve this issue of the lack of confidence, it's to your best interests to acquire as much knowledge and experience as possible in trading different market conditions. The larger your wealth of trading knowledge and experience, the less likely you are going to suffer major bouts of low confidence.
Knowledge in managing your trading risk, experience in navigating different market conditions and knowledge why your particular trading system works will help you reduce your self-doubts. If you know that your trading system works best in specific market conditions, then only use those systems in those specific market conditions and no other.
Over a period of time as you gain experience and knowledge, your mental strength and ability to handle the stresses that come from trading increases. Your mental ability to stick to your trading strategies becomes more consistent, and you don't stress out as much as a rookie.
That doesn't mean that you don't make mistakes, but you start making fewer and fewer, and you don't beat yourself over them anymore. When you make profits or losses, you don't get as excited because it's just another day in the office. After awhile, you expect to experience the natural ups and downs that comes from trading.
So if you are a novice trader, realize that as you hone your trading skills and gain experience, your confidence crisis will start to fade into the background. If you are an experienced trader, it's useful to remind yourself that every trader gets into occasional slumps. What you have to do is keep your mind focused on the upswing that you know will be coming.
Keep on trading and you'll eventually regain your momentum. If you can't handle it, then take a breather and sit out the markets until you calm down. When you can think rationally again, you'll eventually work through your self-doubts and return to profitability.
Want to learn the inner workings and secrets of improving your trading? Ryan Lee Daniels runs a website dedicated to Forex Trading Education where you can find useful information to help you become a better trader.
Article Source: http://EzineArticles.com/?expert=Ryan_Lee_Daniels
http://EzineArticles.com/?Facing-Confidence-Crisis-As-A-Trader?&id=729114
No comments:
Post a Comment