Trading Psychology for Beginners // Ep. 126

In This Episode

• Why most people come into trading with the wrong mindset
• Why trading strategies matter much less than you think
• What happens after the “treasure hunt” stage

What Beginners Should Understand About Trading Psychology

Hey Walter, I'm surprised we haven't covered this before but uh if somebody's brand new to trading let's do like an episode on trading psychology for beginners.

So if somebody's brand new to trading what are some of the first things that you think people need to know about trading psychology?

Well that your savior is not your system. So when you first start trading it's more of a treasure hunt. It's if I find this treasure then I win the game and then the longer you trade the more you realize if I understand myself then I win the game.

So it completely changes, you go from external like looking for the treasure and hunting for the perfect strategy or strategies to in the end you end up trying to figure out okay how am I gonna deal with myself how am I going to figure out what I am.

You know, what's wrong with with the way that I'm approaching this and how do I change things so that I'm better at it?

It all becomes more of a self-discovery.

So what I would say is that in trading we initially look to the outside particularly the system to save us and then later on as we trade for years and years we understand it's not really the system.

You Need to Understand Yourself First

It's like you know okay this is probably a bad analogy but like you know a beauty pageant right. They have the swimsuit, the evening gown and whatever.

Does it really matter which evening gown they are wearing?

Is that contestant gonna win because she's wearing the most beautiful dress or whatever or the best dress for her you know physique?

No, like it's gonna be the whole thing, the interview the evening gown, the swimsuit. It's all the stuff together.

It's the same thing with trading.

Yeah sure, the system is important you got to have a good one especially one that you believe in that fits with what you believe.

That's the reason why someone who's a brilliant Trader can share with you exactly what she's doing and it may not work for you.

That's really because it's you.

It's what you believe that's so important. So yes I would just say, in a broad sense in the beginning, we all look for the the treasure and then later on we start to learn it's actually myself.

It's how I deal with my own thoughts my own feelings how I interact with my own strategies that's what's going to make me a better Trader.

That's what's going to help me get to the point where I'm consistently where I want to be as a Trader, or at least close.

Because a lot of times you know you always feel like you can improve.

But yeah, so that's what I would say.

The Ultimate Reward of Trading

OK cool, just to add on to that, I think that the ultimate payoff in trading is actually self-development.

A lot of people who don't succeed in trading and some of them don't want to face the issues that they have. So I think that's part of the process and ultimately one of the biggest rewards of trading is figure out who you are.

Figuring out how you can use your strengths to do this thing that can help you make a living and at the same time, maybe trading is not even for you.

So that's also part of the self-development process also.

But I think that really facing who you are and what you're made out of I think is probably the biggest payoff of trading aside from the money.

Yeah I think if you can come to embrace that I think that trading becomes not only easier but more fulfilling.

I agree.

False Success in Trading

I would even go so far as to say that if I meet a Trader who's successful or has been successful to that point and they don't have what you're saying, you get a sense that they definitely haven't gone down that road, I probably shouldn't say this, but I think that they're just lucky and that they're eventually gonna crumble. 

It's kind of like if you go into the casino and there's that really brash guy who's going hard at the table, pushing all those chips in on blackjack or craps or whatever game it is and then he wins.

He thinks oh yeah, I'm so good like I'm such a great craps player.

OK well to me, that's exactly what you described. If you have a Trader who doesn't have that, who hasn't gone down that path of self-discovery ,all they've really done is they've gambled really hard and they've been lucky.

Later on, what's gonna happen is because they haven't gone down that path they're gonna get wiped out. There are a lot of Traders out there who have done this.

Jesse Livermore is one that comes to mind.

You just get to that point where they just blow up and it's because they're not seeing trading as a game and they got lucky.

The casinos are full of those sorts of people that's why the casinos invite them back right?!

Come and stay at our suite, you can stay in the Presidential Suite.

Come on back, come on back, we want to see you again because they know that eventually if they keep doing that hardcore crazy risk stuff, and they don't have a system and they don't know what they're doing, they're gonna blow up and give all the money back to the casino.

So yeah, I actually think there are those Traders out there who people will will fawn over and say that they're so great and all that.

But I always think man, it's a ticking time bomb.

It's it's not gonna be pretty.

Sooner or later, if they keep doing what they're doing, and they have no clue about themselves, they haven't done any sort of digging into who they are and all that, they're just gambling and they're gambling hard.

They're a little bit wild with their with their bets and eventually they're gonna blow up.

Conclusion

So yeah, but that's just me, that's what I think.

Yeah, I mean that's not that's not just our opinions right, it's an actual fact. You can read books like Market Wizards, When Super Traders Meet Kryptonite and even Millionaire Traders has a few stories like that.

So yeah, if you read those books you can you can see where these people were so-called “successful,” they had fun, they were trading millions of dollars or whatever, and they just blew it out because they didn't know themselves well enough.

Thanks for watching!

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