November 20, 2008 at 11:19 am | | Comments 8

Conquering Crippled Confidence

(This is a follow-up post to Triumph Over the Trading Jinx.)


photo credit: Daquella manera

Anyone who has traded for virtually any length of time is familiar with the feelings losses bring.  Frustration, irritability, and maybe even some despair if the streak has continued long enough.  But possibly even more damaging, more crippling, is the loss of confidence.

Every trader has some risk capital to be used for their trading operations, but what many often forget about is the amount of psychological capital they have.  We all begin with some amount of confidence that we can turn a profit with our trading, which of course can grow or shrink based upon our results.  And while we can locate more money to trade with (if needed), it’s not as if we can locate a fresh pool of confidence!  As a result, it becomes incredibly important to protect what confidence we do have.

Decisions, Decisions

If you’ve been struggling with your trading, you aren’t the first to feel that way, nor will you be the last. At times it almost feels like our timing could’nt be worse, and that’s just going to happen occasionally to those of us who trade. Markets are uncertain, so if there’s one thing we can count on it is being dead wrong at times.

Having said that, the one thing we CAN do is choose how we respond.  We can decide we’ll never be a success, and we’ll be correct if that is our choice.  Or, we can choose to find a way to trade profitably. There are many ways to skin the market cat, but we need only to find 1 or 2 of them to turn a profit.

Our response not only includes the attitude with which we approach trading, but also how we manage our money.  When we’re trading well, we want more at-bats.  When trading is bad, we want fewer at-bats and smaller trades even when we do play.  Backing down your trade size while waiting for clarity is your top priority when you aren’t seeing the ball well.  It’ll help to preserve your confidence and your account, making it far easier to make up lost ground in both categories once you hit your stride again.

Break the Cycle

If you’ve felt caught in a rut lately with your trading, I’d encourage you to re-assess your attitude, and base it not solely on the results you’re getting but on your entire process.

If you’re staying disciplined and taking only high-quality setups for trades, then you’re doing your part and it’s an uncooperative market (and time to back down or employ a different method).

However, if you’re pressing when you’re down and trying too hard by forcing trades to work, attempting all sorts of trades just hoping that something will hit, then you aren’t following a method that’s going to pay off or restore your confidence. Take a step back for a few days and evaluate how you trade your best and what changes you need to make right away.  And then make them.

Always Be Willing to Adjust

Trading the market isn’t easy, and it requires this ongoing assessment of ourselves and our method. When what we’re doing isn’t working, it’s time to slow down, trade smaller and less frequently, and work on getting our heads clear again.  Sometimes our problem lies in our method, other times it’s caused by our attitude or impatience.  Once that’s done, then we go back up in size and trade frequency. But it’s far too easy to let poor performance press us into more bad mistakes in an effort to make it back quickly.  And the path to good trading just isn’t found overnight.

Trade well out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]