What is the #1 characteristic of top traders?
In his book Trading in the Zone, Mark Douglas says, simply, “Great traders are not afraid.”
I would go one step further. I’ve worked with some of the best traders in the business. I’m talking about guys with unlimited capital, trading 6-9 markets at the same time.
The one thing that differentiates them is that they are POSITIVE about everything that happens to them and everything they do. This POSITIVE attitude enables them to think clearly, take losses in stride and not be ego-inflated by their wins.
Positive Trading Psychology – Why it works
I’m 100% certain that they are not positive merely because they are winning; they win because they are positive to begin with. (There is ample evidence from the world of clinical psychology and sports psychology to back up this assertion.)
Most aspiring traders, on the other hand, are over-focused on double negatives (not losing, not being wrong, not missing out), but in real life and in trading, two negatives never makes a positive.
Instead, that attitude actually confuses and demoralizes the brain, resulting in poor decision making and impulsive, erratic behavior. I’ve seen this in countless traders and the research literature supports this conclusion.
If it Bleeds…
There’s a simple reason traders fall into the Negativity Trap: the human brain is hardwired to pay the most attention to bad news. (No doubt you’ve heard the expression in the news business, “If it bleeds, it leads.”)
Do you remember the joyous moments in trading as vividly as the painful ones? Probably not.
After a brief honeymoon, aspiring traders gradually pay more and more attention to losses and less and less to wins. We start to obsess about them.
And even though you may know intellectually that losses are normal and cannot be avoided, a critical part of your brain absolutely thinks otherwise.
Bottom line: It is essential that you clear away the residue of negativity first in order to prepare to install the beliefs associated with a confident, winning attitude. Negativity must gently be washed away before positive beliefs are installed. Stick with this when it comes to your trading and you will be more successful.
Until next time,
Dr. Kenneth Reid holds a Ph.D. in Clinical Psychology. He is currently a trading coach and has published articles for Forbes, SmartMoney, and SFO Magazine. He has also appeared on CNBC and writes a column on The Trading Psychology for Trader Planet. Kenneth Specialized in trading stock and futures and is working on a futures trading book.