Trading Confidence – Your sure path to mental toughness as a trader

Be aware: Without self-confidence you will not be a successful daytrader. Everything stands and falls with this emotional state.

For this reason it is very important for you to build up self-confidence as fast as possible. And this again and again.

Self-confidence can get lost? Sure it can. In fact, it is almost the rule, not the exception.

Ask an athlete!

Especially professionals fight with dwindling self-confidence at regular intervals. Especially when they have suffered a heavy defeat and have lost focus on the essentials by distracting their thoughts. For you as a trader, your personal ‘defeat’ is usually felt through continuous or extremely high losses.

Since these situations occur again and again, you must be able to restore your self-confidence.

Four simple steps are necessary for this in day trading – I’ll show you what these steps are now.

Ready to go? Wonderful. Let’s get started.

Step I: Take your foot off the gas as soon as you start to doubt yourself

If you are going through a bad period in the markets, your trading results are constantly deteriorating, and you feel a burgeoning uncertainty about your continued success as a trader rising within you, it is imperative to take your foot off the gas pedal of your trading account.

This behavior will secure your account for the time being, but also your ego. This measure is extremely important, because they are your most important resources as a trader.

However, many traders do exactly the opposite: out of anger and frustration, they push the accelerator further with the goal of recovering the losses as quickly as possible.

The end of the story: It will be twice as hard for you to get your trading psychology under control again. Your draw down will increase unnecessarily and this in turn puts you under further pressure. You will thus deliberately make your trading life difficult.

Do not do this to yourself and release yourself hard!

Consciously withdraw yourself from the pressure of the daily trading competition. Gain distance, disperse your mind through other things and let your mental cobwebs blow out of your head.

The more intensive and positive this distraction works for you, the better. Only when you hardly think about trading anymore and your emotional mood starts to turn for the better – important to get new motivation – you take the next step towards reactivating your self-confidence.

At this point a very personal tip:

Do not take trading too seriously. Put it in relation to other things. Especially those things that are good for you and for which you should be grateful. Such an attitude will help you to feel the ground under your feet again very quickly.

Step II: The error analysis

Now the time has come for you to approach the problem with your self-confidence actively and rationally. That’s why it’s so important to actually get your ‘trader’s bulb’ free and cool down your boiled up emotions.

Proceed systematically with the error analysis.

You now have an enormous advantage if you have made a habit of keeping a trading journal. In this case you only have to evaluate your trading diary records. Very quickly you will then come across the actual problem triggers that led to your misery. When analyzing the data, concentrate on the most massive mistakes, and most importantly, be aware of what is a real mistake in trading.

Real trading errors – a definition

Here for orientation my own definition of a real trading error:

As a trader you make a mistake as soon as you break the rules you have set yourself. And only then!

This definition means in plain language:

If, for example, you make a profit too early, this does not necessarily mean that you have made a real mistake, just because the prices have subsequently moved even further in the direction of your trade. You can’t know that at the time of taking a profit. However, it would be a mistake if you had no profit target at all for that trade and your plan was to make a trend-following stop that would be followed.

Make a note of the real mistakes and clarify what kind of behavior led to them. Then try to find better options for similar events in the future. Please do everything in writing. Put it on paper! That way it will be memorized and your brain can process it optimally.

You should also record the so-called ‘pseudo errors’. You have to keep an eye on them during further trading, because some rules of your trading system might need to be adjusted.

That means: You can possibly improve your trading system from the technical side.

Once you have completed the error analysis, the time has come for you to get back into trading practice.

Step III: Training without real risk

When you have reached this stage of your crisis management, you are not yet able to get back into the hard daily business. Now your goal must be to train the newly developed options for action (and proven ones) in a practical environment. Through this measure you will gradually bring back security to your trading actions. Modern trading software is perfectly suited for this.

So use the simulation mode of your trading platform. Here everything runs 1:1 to real money trading. The only difference: Your account is not armed in this mode.

The replay function – must have tool for day traders

It is even better to work with the so-called replay function. Professional platforms offer this function, but unfortunately not all of them.

The replay function is a real powerhouse.

You can save course data and later replay it without any problems. It seems to you as if the whole thing runs live. And on top of that you have the possibility to play back the stored course data faster. With this feature, the quotes on your trading monitor move in fast motion.

But why is this feature so useful for you as a daytrader?

There are two advantages to emphasize:

  • You can trade complete trading days in a few minutes and save a lot of time.
  • With the help of the time-lapse function it is possible to cause artificial psychological stress. You can build up as much time pressure as you want in your decision-making during trading.

If you are familiar with effective, modern training methods of performers, you will know what an advantage this type of training brings.

Your role model – The Navy Seals

A good example is the Navy Seals special unit of the US troops. These really tough guys simulate whole mission scenarios and train under time pressure and extra adverse environmental conditions from a certain point on.

Do you ask yourself now if these tough guys still have it all?

I would say yes – at least in most cases.

Seriously, these people know exactly what they are doing. Because if you have to constantly act under extra stress, you instinctively do what you can do and what works for you. In addition, this psychological pressure prepares you for real crisis situations where your adrenaline inevitably goes through the roof.

You can repeat a certain market situation over and over again when you work with Replay. It is best to do this until your optimal behaviour has become second nature to you. This is ingenious. Because it helps you very well to train productive automatisms. By automatisms, the expert understands behaviours that run automatically without you having to think about them.

Through an artificially created stress environment, you improve your mental hardness in everyday trading. Your susceptibility to mistakes will decrease, because you will be able to call up the right behaviour even when your emotions start to boil.

Why? Simply because you are now used to acting in this way.

You can achieve more effect through this training, the more short-term you are.

And as outlined above: The replay function allows you to internalize course progressions of weeks, or even months, in a very short time. If you use this possibility intensively, you can quickly acquire an incredible and intensive market experience.

Step IV: Real money trading at low risk

You can get back into live trading as soon as your motivation is back, you finally feel a tingling in your stomach when you think about trading, and you have trained your automatisms well.

My advice to you:

First, do a day or two – maybe more – of real-time simulation trading. If you have a really large trading account, you can also resume real money trading immediately. In this case, however, it is imperative that you use the lowest possible position size.

If you have had a serious trading crisis, you should continue to trade at low risk until you can make significant profits. The results of your trading must be absolutely convincing with the lowest risk.

Be aware of this:

If you can do it with low risk, it is only a question of scalability to generate higher profits. However, if you can’t even do that at the lowest risk level, it would be foolish of you to want to go back to being a player right away. In such a situation, you may have to go back to Step II. Even if – admittedly – this would be very difficult for every trader.

In order to achieve great things, you need a new sense of confidence in your abilities as a trader and especially in your discipline.

Each of us depends on a sense of achievement and clear positive feedback to build true conviction in our abilities. This is exactly what Step IV is for.

One more thing:

You have no reason to get impatient because you might not be able to make some big winning trades at full risk. Especially as a daytrader you will soon have the next, worthwhile trading setup on your monitor.

Closing bell

Every performer and therefore every daytrader has to go through the cycle from initial weakness to strength, back to weakness, and then to strength at least once. This process is completely natural. We traders are not robots without emotions. Do not be afraid to lose your self-confidence every now and then. If you follow the four steps in this article and are able to take better options for the future out of every crisis, you will become a master of crisis management. And the best part is that, little by little, this will become your biggest advantage over your trading competition.

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