Why does mindset matter?
Mindset matters so that you can overcome outside forces. Outside forces may include friends, family, significant others, or anything or anyone stopping you from achieving what you want.
Learning a new skill requires focus especially stock trading because the market will humble you. Quick.
You are going to have extreme highs and you are going to have extreme lows. Most traders go through this roller coaster at some point. You will have a nice winning streak, and you’ll think you have it all figured out. You up your position size. That next trade goes to zero, and you eliminate all of your previous gains.
You’re starting from zero again. Can you overcome that?
The #1 reason traders fail is that they don’t have a strategy or they don’t stick to their strategy.
- When will you buy
- When will you sell
- What contracts will you buy
- How big is your position
- What is your risk
- What do you do when a trade goes against you (It will happen- often)
Having a strategy answers all of these questions, but most importantly eliminates and controls your emotions in the heat of the moment. “I can get more out of this trade.” Creating, practicing, and sticking to a strategy will make you a better trader in the long run.
The most common emotion you see with new traders is FOMO (Fear of missing out). This is especially prevalent with social media. You’re going to see people posting FOMO tactics on Twitter to pump stocks or simply showcase their winnings.
- “You don’t want to miss this.”
- Current price is $12 after 3x run-up from $4 in a week. “Next stop is $20. Get in or miss out.”
- “The next FB. This will be like buying FB at $2 per share.”
It is inevitable you see these types of people. You are going to experience greed, fear, excitement, jealousy, impatience, and anxiety as you watch everyone else hit monster returns while your plays are barely moving. At the end of the day, it is important to stick to your strategy.
Take a look at the chart below:
This is where having control of your emotions comes into play. You will hit those runners. There will be other runners. You missed this one. F*ck that stock. Figure out why you missed it instead of chasing it and losing. The stock market isn’t going anywhere. There will be thousands of more runners and you WILL catch them.
