As a psychologist, and a trader, I am interested in how the two interact. My psychology effects my trading and my trading effects my thinking. I often think about how my thinking interacts with my trading, and if you have been trading for long, you probably think about this as well.
If you want to improve your trading, I believe you should definitely think about your thinking. Thinking about your thinking has a name – it is called metacognition. Your thinking may blunt your trading success, or it may drastically improve your trading. Our thinking determines our success in anything, and our trading is no different.
For a quick illustration of this fact, consider the following:
+ One lucky day, you win the lottery! You win 3.3 million dollars!
+ Thinking about your winnings, write down your answers to the following questions:
- How does this winning make you feel?
- Are you excited by this windfall?
- Do you now feel “rich?”
If you haven’t written down your answers to these three questions, do so now. This is a great opportunity for you to learn about the power of your thinking, and how your thinking may effect your trading. So take a few moments to write down your answers.
How did you answer? Did you feel rich after winning 3.3 million? Were you excited by this windfall? Now consider if you were someone else who won the lottery, what if you were Donald Trump, how would you feel after winning 3.3 million?
Of course your reaction would be different if you were Donald Trump, because you would think in terms of 100’s of millions, and a paltry 3.3 million may be nice, but not enough to make you feel “rich.”
Now think about your trading. How may pips will make you happy? How much money will make your happy? Do you think about your trading in terms of the money you make? Do you stop trading after you make a certain amount of money? Have you ever taken profit on a trade not because your trading system gave you an exit signal, but because you made a lot of money on the trade, and you wanted to take a profit?
Now think about this one idea, it may improve your trading: What if you concentrated on following your trading system to the best of your ability?If you concentrated on following your trading system, and did not think about the money, if you simply followed your trading system and never stopped trading after you had several nice winning trades, if you never cut a trade short because it “made enough” – what would happen? Would you make even more money?