What really affects the productivity of traders? Why are very few successful in their trading career?
You might have read about so many factors that affect a trader’s performance, but in reality, these numerous factors can be summarized in this three-part series. The Unsuccessful Trader Series seeks to give a straightforward solution to the ambiguous question of why traders fail and help the challenged traders find a clear-cut solution to this question, and how success can be sustained.
To excel in any sphere of life or in any activity ─ whether it is mental such as trading, or physical, such as driving a car ─ we need to master the skills involved. These specialized skills focus our attention on the necessary requirements to look at and think about. Our behaviors towards events also will spell a huge difference between those who have learned the necessary skill and those who haven’t.
Understanding Mental Skills in Trading
In trading as an activity, the thought patterns that lead to the optimization of such activity is a skill every trader must acquire if success must be attained. The aspiring trader must learn to think in certain ways if he will produce certain results.
Thought patterns are a skill! Learning the right thinking methodology and strategy is a requirement for excellence in your trading career.
Describing thinking methodologies in trading entails approaches to trading goals and problems. For instance, as a trader, it is a mental skill when you have the ability to identify conditions that lead to trading errors even before they happen.
Some traders can learn how to adapt to fundamental changes in market conditions more swiftly. Another trader can learn how to achieve and maintain a mental state of objectivity while analyzing the market. All these and more are mental skills that must be acquired as a trader journeys through the financial world.
Mental Skills and Trading Systems
You might ask – what is the difference between mental skills in trading and learning a good trading system?
Trading systems help reduce the noise in solving every problem the market poses to the trader. It teaches the trader specific modes of operation in navigating through the market environment while ignoring whatever is not taught by the system. So, in using trading systems, a trader finds a specific way of defining and interpreting market behavior and also gets precise directions and instructions regarding what to do in certain market conditions.
Since trading systems give direction as to what to do and what not to do in certain market conditions, following this direction can over time lead to the development of mental skills in trading.
It should be noted that a trading system is not necessarily a mental skill. Trading systems point the way for your awareness to be directed but do not in themselves direct your awareness. A true mental skill, however, does not just point the way but also directs your awareness as well.
What this means is that trading systems help you spot signals but do not teach you the dynamic skills to efficiently trade these signals. Learning the right mental skill in trading helps you not just spot signals but walks you through the unexpected market behaviors that could surface when trying to trade what your strategy has spotted.
Final Note
Understanding how to act in unique market conditions is a mental skill that goes beyond just learning a trading strategy or system.
The market could act in a way that requires the trader to make split-second decisions. If a trader has not paid the price through knowledge and experience to learn the mental skill for times like this, he/she will soon find out how limited a trading system can be.
Featured Image Credits: LinkedIn
