The True Winner’s Mindset

There are many common themes and threads among the world’s most successful traders:

• The self-discipline and self-awareness to first conquer the markets and themselves, and then to manage massive amounts of money without succumbing to regular human weaknesses, vices and psychological perils that typically affect people.

• The self-confidence and openness to take risk, not just financially in trading, but in betting on themselves as entrepreneurs and independent market combatants.

• The humility to accept losses and know when they are wrong, and the endurance to take the pain of not only losing money, but also failing to make a correct call – repeatedly.

While all properly-initiated traders know that being frequently incorrect in your opinion and taking regular small losses is irrelevant to good trading, it is a form of Chinese water torture for the vast majority of people – and downright unacceptable in most occupations.

That makes these character traits uncommon in the average person and aspiring trader.

But all of these interesting elements of success belong in their own blog post which I will write someday. Today’s blog post is focusing on the final and most under-appreciated aspect of the most successful traders in the world: the fact that they treat their trading like a business.

Trading Is Not A Recreational Activity

To elite traders, trading is a job like any other job.

The main enviable difference is that they get to be their own boss and pick their own hours (if they are retail traders), and/or potentially make huge sums of money for minimal time invested (if they are prop or hedge fund traders).

But one thing elite traders do not normally experience in the markets is excitement.

For the majority of elite traders, even including fast-paced scalpers, they typically experience trading in a flow-state. There is no excitement, and more importantly, no fear. If there is fear or excitement in their trading day, then that usually means they did something wrong or inconsistent.

When you are consistent over a long period of time, whatever it is that you are doing becomes second-nature and the excitement goes away. It’s the price you pay for being a professional. It happens to everyone in all careers to some extent.

If you were to go to your doctor and you saw that he was fidgeting and couldn’t sit still and then he said he couldn’t wait to begin operating on you, you would likely feel uncomfortable – and so you should!

You want a doctor who has his nerves under control, not a gung-ho lunatic who’s eager to get his hands dirty at any cost. Likewise if you were to get on a plane, and the pilot announced that this was his first flight and he was extremely excited to see what happens – you’d probably feel a little bit of anxiety.

Amateurs get excitement out of the markets. Experts know exactly what to expect, because they know their strategy. Of course they don’t know how the markets will specifically play out this particular time – but they know what they’ll be doing regardless of what happens. They are focused, and they have a plan and a strict process that governs their business operation in a consistent and sustainable manner – just like any other successful business.

And so, the reality is that – most of the time – long-term sustainable successful trading is boring.

If you want to feel excitement when you put your capital at risk, then you belong in a casino, not the markets. And there’s nothing wrong with that! Just make sure you know the difference. I enjoy going to the casino occasionally for the excitement of gambling. But while it’s a nice surprise sometimes, I never expect to win.

This is the appropriate attitude for trading, too. If you want excitement out of your trading, then don’t expect to make any money.

The elite trader does not think or care about how much money they are going to make on their next trade, or how much they might lose. Those thoughts have little to no emotional impact on them whatsoever. It’s completely irrelevant, because they know all of that is taken care of over the long-term as a result of employing the correct foundations in their trading process.

Of course, there are times when their system is doing particularly well or particularly poorly and that still affects their emotional experience. Successful traders are not immune to joy or suffering or stress. But those feelings are definitely subdued and mitigated by the fact that their perspective is shifted from the short term to the long term, and their focus is process-oriented instead of solely results-oriented.

Great traders don’t make lots of money from their efforts at trading directly. If that were the case, then everyone who tried really hard at trading would be making lots of money. No, the secret is that they follow their rules and processes, and depending how effective their rules and processes are determines how much money they make.

There’s a distinct difference!

Don’t Expect Trading To Make You Feel Good

If you want to feel a sense of accomplishment and achievement from your trading, then focus on your trading process – not your trading results.

Track your discipline and how many trading errors you make. Train yourself to think in terms of the bigger picture, and then you will begin to feel good about yourself when you exercise self-discipline and proficient trading skills and stick to the plan. There’s a big difference between feeling good when you win a trade, and feeling good because you followed your processes properly.

It takes time for your processes to play out, so it will take time for you to feel good about yourself if you focus on judging yourself based on the progression of your process. Which means you can’t expect trading to make you feel good all the time. If you enter the business with that expectation then you will find the journey unpleasant. You need to develop an appetite for challenge, or else the challenges will overwhelm you.

And as I said before, if you want excitement, then maybe consider rewarding yourself by going to the casino (or something like that) a few times a year when your trading is going well. Or go sky-diving, or bungee jumping. But whatever you do, don’t treat the markets like a casino.

Going to an actual casino when you feel like gambling will help you to differentiate between trading and gambling.

But in my experience, most traders who become consistently profitable never care to set foot in a casino again anyway. Because they see it as a waste of money that could be better spent invested in their systems that make money and have an edge.

Once you understand what it means to have an edge, you typically lose interest in negative games or negative implied odds like the ones casinos offer.

Although, poker is a little bit different. In poker you can actually become skilled enough to beat the other opponents. As a trader I’ve grown to appreciate poker much more.

It’s become my go-to game when I feel like gambling, because unlike the casino, if you take some time to study the game and you pick your games carefully, you can actually have an edge over the other players (especially at the low stakes where people play loose and are usually just there to gamble).

But I digress – the subject of poker and its similarities to trading deserves its own blog post someday.

How To Treat Your Trading Like A Business

Trading can be many things, but it should only be one thing if you plan to not only survive but thrive over the long term – and that is a business.

And if you’ve ever owned a business or worked for a business, then you know how impersonal financial affairs are in larger organizations. And that is how it should be with trading. It’s no different.

The integral difference is that instead of the company’s reputation and capital at stake, which is depersonalized, it’s your own reputation and capital at stake. Not just temporarily, but for so long as you’re active in the markets – and with ever-lurking uncertainty for the future.

That is why emotions are heightened in trading compared to other financial or entrepreneurial endeavors. Not only are we putting ourselves on the line, but we have to do it repeatedly every time we place a trade. Every trade we take is a new business venture.

But it should really be viewed as an investment within a larger business venture, which is comprised of our entire operation as a trader. That is the appropriate way to think of it. Not all investments play out ideally, but in a successful business, the ones that do make up for the ones that don’t.

That’s exactly how trading should be.

The most effective way to treat your forex trading like a business is to journal and track your trading statistics extensively. Don’t just track them for the sake of it though – make sure you are tracking stats that mean something to you and that you understand how to interpret.

For example, don’t just focus on your overall win percentage or your overall drawdown. Break your trading down into micro-routines and pieces.

Analyze each currency pair as if they were your employees. Which ones are carrying their weight? Which ones are holding the team back? Don’t make radical decisions based on a small sample of data – but once you have enough data, over say 100 trades or a 6-month period, then you can break things down and see if perhaps you’d be better off letting go of certain pairs from your portfolio, or increasing your risk on the pairs that are consistently performing well.

Analyze your average profit versus your average loss. Make sure that you are hitting your target numbers and staying above your danger zone. I wrote an article explaining the mathematics behind analyzing your edge – click here to check that out if you want more information on how to break down your trading Risk:Reward vs Win Rate profile to determine your minimum win rate required to turn a profit. If you can’t consistently exceed that win rate, then perhaps you need to return to the drawing board with your strategy and make adjustments.

Analyze your routine. Do you perform top-down analysis at the same time each day, or are you lazy and skip a day here and there which results in sabotaging your long-term trading performance and psychology? Do you draw your trend-lines and support and resistance the same way every time, or are there inconsistencies there? Do you use the same broker data to perform your technical analysis each time?

These are the types of things you should be thinking about as a trader. Not your next trade. The next trade ought to take care of itself if you are doing all of this properly.

The Benefits of Treating Your Trading Like A Business

Once you are in this optimal place of operating your trading like a business – consistently, with strict processes in place that are designed to enhance your edge and your long-term expectancy – then a lot of the immediate stress and pressure of trading is relieved.

As traders we have a lot of pressure to perform. But the markets are a wild and unpredictable place, which makes it difficult for us to determine what exactly it means to perform well.

If you define “performing well” as following your processes and trading rules to the letter each and every time you place a trade, then it becomes a lot easier to grade your performance as a trader.

The other benefit it has is that it shifts the blame from you to your system. If you’re not making as much money as you’d like to, but you’re following your rules consistently, then you know exactly where the problem lies. Not with you, but with your system!

So it becomes a lot easier to diagnose and fix the issue. Rather than questioning yourself and whether you have what it takes to be a successful trader, you merely question your system and whether or not there are things you might be able to improve about it.

Once you isolate an objective pattern in your trading that could be improved, then it’s a simple matter of backtesting variations of potential improvements until you find one that does the job. No emotional pain or suffering is necessary in that process (other than the pain of backtesting, which is something we all must come to terms with at some point).

This is how you treat your trading like a business. Simply imagine your trading processes and strategies without you in the picture. If you can’t do that, then you may have a problem with consistency.

• Do you have systems in place that could (at least in theory) be automated or delegated to another person without too much confusion in explaining what needs to be done?
• Do you have your processes and rules written down in a detailed an objective manner?
• Do you have organized spreadsheets and statistical data on your trading results, and are you analyzing your current performance in relation to your past performance?
• Are you operating out of a growth mindset and constantly building towards improved efficiency and efficacy?

If you answered no to one or more of these questions, then you need to take some time to better define exactly what it is you are trying to do as a trader.

But if you have all of these elements of your trading under control, then congratulations! You should be proud of yourself. You have truly committed to trading, and it’s only a matter of time before you achieve the success you’re aiming for.

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