In the comments of a recent post on a conversation began about the relative importance of psychology in trading success. Someone referred to one of Dr Brett Steenbarger’s posts – The 3 Myths of Trading – in which he says that success is a function of talents (inborn abilities) and skills (acquired competencies) and that its only after an individual possesses the requisite talents and skills for success that psychological factors become important.

While I have a great deal of respect for Brett’s knowledge of trading and of training traders, I found myself puzzled by his comments. Was he being modest? Perhaps we have a different perspective on what trading psychology is?

I say that because in my experience, learning how to think properly, has been THE most important skill needed to be successful as a trader. I believe that without it you don’t have a chance of developing the broader skills and experience needed to be consistently profitable. Most of us, because of the way the human mind is wired, and because of the way we’ve been trained to think previously – can virtually guarantee non-success unless we learn how to think differently, and how to manage the performance anxiety that Dr Steenbarger refers to in many of his other posts.

I learned the hard way that you don’t wait to add mental strategy as an afterthought once you’ve developed, verified, and practiced your edge. Developing the thinking habits necessary to be a trader can (and in my opinion should) begin on day one – because they are fundamental to understanding the dynamics of successful trading.

  • Learning how to think about and accept risk
  • Learning how to think about and accept that the market can do anything it wants
  • Learning how to think in probabilities
  • Learning not to need to be right on each trade
  • Learning how to stay calm under pressure through techniques such as biofeedback or emotional clearing

These are just some examples of core mental skills that need to be developed and practiced before even your first live outing in the markets.

There is absolutely no question that a trader needs a defined and tested edge, they need to know the expectency of that edge, they need to find their trading niche, they need effective money management strategies. However, there is a very high likelihood that even with all those things in place – a trader will fail spectacularly without having learned how to think and how to harness (not control) their emotions.

So what comes first the chicken or the egg? Trading Method or Trading Mindset? In this trader’s opinion, understanding the ideas of mindset outlined in Trading in the Zone by Mark Douglas and the work of Dr Steenbarger should be a prerequisite to anything else you do in trading – even beginning to develop a method. By understanding these dynamics, by understanding yourself first and how you are likely to impact your own success, you will pave the way for the successful choices you will make in terms of the type of trading you engage in, your trading method, and the development of your trading plan.

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