In this case study, Nathan overcame a common tendency and turned his trading around
Nathan’s trading results fell short of his expectations. Often, his first trades of the morning ended in losses, and this soured him for the rest of the day. Nathan knew the problem had to be mental, but wasn’t sure where to start.
There are many reasons traders lose money. How we think about those reasons and what we do about it can make all the difference.
Nathan’s Thinking Problem
Nathan was blaming the so-called “Smart Money” traders for his early morning losses. “They manipulate the market and wrong-foot me every time,” he complained. Nathan viewed them as powerful forces that he couldn’t control. And he was right; he can’t control the actions of other market participants. The only thing under Nathan’s control is Nathan himself. It’s the same with every trader.
Blaming the Smart Money, the market, what the Federal Reserve is doing, etc. puts the power onto external factors over which we have no control. While these things may influence the markets, they are not determining factors on your trading results. What you focus on and what you do are much more important. The good news is, these are the things over which you have direct command.
Actions Nathan Took
The first step Nathan took was to set aside concerns about the Smart Money and to focus on what he could do differently that might have an impact on his first trades of the day. He began with better preparation. This included an assessment of the overnight trading with special attention to the trading during the two hours before the US market opened. He looked for the tell-tale signs of supply and demand during this period as a way to have a better understanding of the type of trade to make as his first trade of the day. He called this, “My early morning radar.”
What Happened
Nathan tracked this over a few weeks. He kept notes on the overnight trading and a record of his first trades of the day. Not surprisingly, Nathan’s results began to improve.
As results improved, so did Nathan’s confidence. He no longer talked about the Smart Money. Nathan took charge and immersed himself in getting a clear read on the early market activity to gain a better edge. After following this procedure for a few months, his concerns about external factors changed. When asked about what the Smart Money might be up to, he said: “I don’t know and really have no control over what they do, but I do know that if I focus on what I can control, I’ll do well. That’s my real edge.”
Three Steps to Improve Your Trading
If you are having difficulty in your trading like Nathan, start to pay attention to your self-talk – i.e., the things you are telling yourself. If you hear yourself blaming outside forces like other traders, government interventions, the news, etc.? Recognize that it may feel good to scold an external force, but this does not help your trading. Instead, take personal responsibility and consider actions you can take to turn the difficulty into an asset.
Follow these steps:
- Be specific about the area of concern. Define it carefully.
- Ask yourself: “What can I do differently that will change the situation?” Be specific here, as well.
- Track your progress. Use a trading journal to log progress. Address any setbacks right away. Remember, no one hits the bull’s eye with the first arrow. Make adjustments and keep working to improve.
It is important to develop sound mental skills that correspond to your trading like Nathan did in this case study. You can learn more about how to do this for yourself with a free, 7-part guide to mental trading skills you can access at my website.
