How to Maintain an Open Mind While Trading

Updated from its original posting on July 2013

Traders always harp about maintaining discipline and always following the trading plan. While having discipline is a very important trait for a trader, we also have to be wary that if we’re too stuck in our ways, we end up imposing our ideas on what the market should do, instead of reacting to what is actually happening.

In this week’s edition of Pipsychology, I’m gonna teach y’all a little trick to help you develop and maintain an open mind while trading.

All you really gotta do is question the market. Really, it’s that easy.

Why, you ask? Well, asking questions enables you to look at different perspectives of the market that you initially may not be aware of. Keep that in mind when you ask questions. However, I want you to think outside the box and not just stick to simple and random questions like “What pair should I trade today?”

By questioning, I mean that you should ask what the market “should” do in light of all the information – fundamentals, technicals, and sentiment – available at that moment.

For example, you can ask a question like, “How will dollar bulls act today given the dovish ECB statement we saw yesterday?”

If you’re a technical trader, you can also question the market by looking at its recent price action. For instance, we see that USD/JPY has been trading higher for the past few days as evidenced by its higher lows on the hourly timeframe.

You can ask yourself, “Is this uptrend still apparent in higher time frames? Has it made a new high? Will it encounter any potential resistance level soon?”

If you see that USD/JPY is nearing a major psychological handle but still bouncing off support at another area of interest, you may opt to look for opportunities to scalp intraday trends rather than swing trades. Heck, this could indicate that the pair may soon consolidate. Do you really want to get stuck in that?

This practice will make you think of other potential scenarios that may emerge and enable you to become a better “listener” of the markets, rather an “imposer” of your own thoughts and views that in reality, may not mean zilch to the market.

I believe that much of the information we need to catch those good trades are already available to us. It’s just that our biases often make them unclear. Learn to question the market, young Padawan. I know it’s not exactly scientific but it can definitely help make us become more open to the market’s possibilities.