Sunday, 5 January 2014

Trading to WIN Versus Trading NOT to LOSE

What do you say to yourself when you are considering a trade? do you think of trading to win versus trading not to lose?

Most traders would naturally focus on NOT losing, because that's what they are trying to avoid. By focusing and concentrating on not losing you are actually engaging more so in a losers mindset. It is better to set up a positive self fulfilling prophecy. So if you are constantly recognising self-talk which engages in conversations like “what if I lose money” or “what if I have a bad day”, you should pay attention to that internal conversation and try to think more positively saying things such as “how can I have a good day” or ” how can I make the most out of the trade and its opportunity”.

I have broken down the characteristics of traders that are trading to win as well as traders which are trading not to lose. A trader needs to consider at all times before and during a trade whether they are thinking in a way that is more engaged in “Trading to Win” or “Trading Not to Lose”. Concentrating on not losing is usually what leads to losing and concentrating on winning is what usually leads to winning.Trading is a business that requires taking Risks and Embracing them, focusing too much on not losing disables a traders ability to take Risk and Accept it. To be successful in trading you must be willing to take Risks, but at the same time know and manage your risk at all times from the perspective of your Goal\Objective and not because you don't want to realise that cost.

The Characteristics of a trader who is “TRADING NOT TO LOSE”

* Focus is on NOT losing (which leads to struggle with gaining!).

* Using tight stops to prevent bigger losses, mainly out of Fear of losing.

* Trailing stops too aggressively in order NOT to lose.

* Snatching at profits, the fear of a certain profit becoming a loss or no profit.

* Holding onto losers, with the inability to accept a loss, even after the reason for being in the trade is over.

* Is Fear driven rather than driven by their Vision or Objective.

* Is driven by past experiences, which cloud the present moment and what is REALLY happening.

* Looking for certainty.

* Looking to satisfy the Ego rather than the business.

* Trading to satisfy the P&L.

* Lacks patience to wait for the right trade, and trades to satisfy the need to trade rather than to win with the objective in mind.

* Lacks patience for winners to play out or offside trades to work out, for the fear of losing or giving back gains.

The Characteristics of a trader who is “TRADING TO WIN”

* Focus is on Winning.

* They have a clearly defined GOAL\OBJECTIVE.

* Trades in the GAP between where they are now and where they want to be.

* Trades in the Moment.

* Committed to the VISION of achieving a goal.

* Will embrace uncertainty.

* Will embrace market noise, as long as the reason for being in a trade is still valid.

* Will have belief and confidence in what he is doing.

* Will have Patience for the market to play it self-out and wait for the right opportunity to set-up.

* Will have the patience and belief\confidence for a trade to reach its targets and manage the trade accordingly.

* Trades to trade well!

By Kam Dhadwar