Brett found trading confidence elusive.  “If only I was more confident, I’d be a better trader,” Brett explained.  What might cultivate more confidence?  “Making more winning trades, of course.”  Sorry, that’s the wrong answer.

The Source of True Trading Confidence

Trading confidence doesn’t come from the number of winning trades, how much money was won, or other ‘statistical’ measures.  True trading confidence comes from mastering the various skills needed to read the market and execute and manage trades. Mastering these skills and abilities is the process of trading and it is this process that brings about confidence. Confidence doesn’t come from more winning trades. It’s the opposite: more winning trades come from a dedicated focus on the process of trading where traders develop their skills and in doing so, develop their confidence. 

Understand How Learning Leads to Trading Confidence

A key to both building self-confidence and maintaining the skills and abilities you already possess is to understand how we learn. Although we can certainly learn quickly, it can’t be rushed. This is especially true for the versatile skill set needed in trading. Far too often I see traders try an indicator or strategy, have a loss or two, and then discard that strategy like yesterday’s junk mail. Their focus is on results, not process. This flawed mindset will only leave you frustrated; lasting improvement and true confidence will never be realized.

Learning is not linear. We don’t start at point A and steadily progress to point B. Instead, learning occurs in a series of ups and downs, punctuated by plateaus. It is very much like a market uptrend. We experience spurts of growth and development, fall back a bit, advance some more, and then rest a while as we hit a new plateau where we consolidate what has been learned.

Traders who wrongly place their confidence on winning trades are thrilled with the ups, get depressed with the downs, and become bored with plateaus. Their focus is tied to outcomes. How can anyone develop genuine confidence riding such a roller coaster?

How to Find True Trading Confidence

Confidence is found in the learning plateaus where our gains are consolidated and our abilities stabilize. Confidence isn’t found in the ups because that is not our true skill level. The learning hasn’t had time to take hold. The downs of our learning curve aren’t places to become scared or depressed. They are to be welcomed. Why? Because this is where we learn what we need to become better. Where else would we get this crucial information?

Trading confidence is found in the dedicated focus on the process of trading. One of the best ways to focus on the process is by reviewing your trading each day in a systematic way through a trading journal. When done consistently, you will be able to identify what you do well and where you need work. It’s a simple process that helps you master your craft.  Ask yourself these questions:

What did I do well today?  

What didn’t I do well; what errors were made? 

What did I learn about my trading today and what can I do differently in the future?” 

From your ongoing review of your trading journal, you will soon see patterns where you can do better.  Pick one or two skill areas you’d like to nurture and develop a plan for improvement.  Include specific activities you will work on every day that will directly improve your trading.  This simple routine helps you create your own personal guide for self-growth.  Focus on this and your trading confidence will soon blossom.

Confidence is one psychological aspect of trading.  You can learn more about confidence and other fundamentals of trading psychology through several free resources at Dr. Gary’s website.