Trading is much more than mastering technical and fundamental analysis. In fact, it also goes beyond having a tried and tested trading strategy. To last in the markets for the long term, you need to build a trading mindset. This means managing emotions, setting realistic goals, remaining patient and disciplined, continuing to learn and not letting mistakes discourage you. Focusing on your trading psyche is important because as the celebrated economist John Maynard Keynes once said, “Markets can remain irrational longer than you can remain solvent.”
To motivate you to build such a mindset, here are some quotes from experienced traders.
The Importance of Mastering Emotions
Emotions like fear and greed tend to lead to impulsive and, often, irrational decision-making. The key is to remain aware of how you are feeling. Here’s what some well-known traders and authors have to say:
- “The consistency you seek is in your mind, not in the markets.”– Mark Douglas
- “The greatest enemy of the trader is fear. He who is afraid loses.”– Norman Welz
- “Money is just something you need in case you do not die tomorrow. Let this be a reminder for you not to obsess over profits and losses. In whatever you do, strive for enjoyment, focus, contentment, humility, openness… Paradoxically (and as an unintended consequence), your trading performance will improve significantly.”– Yvan Byeajee
- “So often we are blind to ourselves. Our ego, fear, and yearnings keep us from seeing the mistakes we are making, even when they are plain as day.”– Larry Hite
- “Hope is a bogus emotion that only costs you money.” – Jim Cramer
- “The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliché, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”– Victor Sperandeo
Continued Learning is Key
Successful traders say they never stop learning. The markets constantly change and building your trading knowledge is the best way to inform your trading strategy.
- “An investment in knowledge pays the best interest.”– Benjamin Franklin
- “The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.”– Paul Tudor Jones
- “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.”– Colin Powell
- “You learn in this business: If you want a friend, get a dog.”– Carl Icahn
Learn from Your Mistakes
A losing trade can wreak havoc on your trading psyche. It can affect your confidence levels and make you feel demotivated. Successful traders look at losing trades very differently. They use them to build their trading knowledge and refine their strategy. Practicing on a demo account and keeping a trading journal can help you do the same, while also being able to recognise when emotions affect your decision-making.
- “The goal of a successful trader is to make the best trades. Money is secondary.”– Alexander Elder
- “Always be yourself and have faith in yourself. Do not go out and look for a successful personality and try to duplicate it.”– Bruce Lee
- “Don’t wait until everything is just right. It will never be perfect. There will always be challenges, obstacles, and less than perfect conditions. So what? Get started now. With each step you take, you will grow stronger and stronger, more and more skilled, more and more self-confident, and more and more successful.” – Mark Victor Hansen
- “Confidence comes not from always being right but from not fearing to be wrong.” – Peter T. McIntyre
- “Accepting losses is the most important single investment device to ensure the safety of capital.”– Gerald M. Loeb
- “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”– Peter Lynch
Patience and Discipline are Crucial to Survival
Patience and discipline are crucial to navigating the uncertainties and volatility of the financial markets with equanimity. Discipline means sticking to your trading strategy, regardless of temptations to the contrary, and taking regular breaks.
- “You need to know very well when to move away, or give up the loss, and not allow the anxiety to trick you into trying again.”– Warren Buffett
- “The market is a device for transferring money from the impatient to the patient.”– Warren Buffett
- “Successful investing takes time, discipline and patience.”– Warren Buffett
- “The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street.”– Jesse Livermore
- “If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.” – Bill Lipschutz
Failing to Prepare is Preparing to Fail
Mastering key skills, such as technical and fundamental analysis, learning to read the charts and staying updated on the latest news events are crucial to making informed decisions. Not preparing in advance for upcoming market-moving events and failing to do your own research can lead to disastrous outcomes.
- “Patterns don’t work 100% of the time. But they are still critical because they help you define your risk. If you ignore patterns and focus on hunches, feelings, and hot tips, just forget about achieving consistency.”– Ifan Wei
- “You never know what kind of setup market will present to you; your objective should be to find an opportunity where risk-reward ratio is best.”~ Jaymin Shah
- “It’s not whether you’re right or wrong that’s important. It’s how much money you make when you’re right and how much you lose when you’re wrong.”– George Soros
- “I know people who repeatedly jump from one guru to the next in search of the Holy Grail of trading. Of course, it doesn’t exist, but you need to know this fact to stop looking for it.”– Naved Abdali
Risk Management is Indispensable
Implementing risk management measures is as important as identifying the best entry and exit positions.
- “Letting losses run is the most serious mistake made by most investors.”– William O’Neil
- “If you don’t invest in risk management, it doesn’t matter what business you’re in. It’s a risky business.”– Gary Cohn
- “Risk is a function of how poorly a strategy will perform if the ‘wrong’ scenario occurs.”– Michael Porter
- “The essence of investment management is the management of risks, not the management of returns.”– Benjamin Graham
- “You have to say to yourself, “If I’m right, how much am I going to make? If I’m wrong, how much am I going to lose?” That’s the risk/reward ratio.”– Peter Lynch
Bonus Quote: Trading Tip
“Never confuse your position with your best interest. Many traders take a position in a stock and form an emotional attachment to it. They’ll start losing money, and instead of stopping themselves out, they’ll find brand new reasons to stay in. When in doubt, get out!”
– Jeff Cooper
To Sum Up
- Building a trading mindset is as important as building a trading strategy.
- Mastering emotions ensures rational decision-making.
- Experienced traders recommend continued learning.
- Don’t let mistakes demotivate you. Learn from them.
- Patience and discipline are crucial for long-term survival.
- Preparing yourself for market moves helps you capture emerging opportunities.
- The importance of risk management cannot be overemphasised.
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