I would say that forex trading is arguably one of the most difficult career paths one could choose. It involves working under conditions that are full of uncertainties. This means that traders rely on probabilities to come out successful, which could result in unexpected outcomes. You may be swimming in pips one day and be down in the dumps the next!
Because of the nature of trading and its effects on the psyche, it is important to be strong and have a lot of self-confidence. In the most basic sense, I believe self-confidence is the ability to ACTIVELY focus on better performance (not success!) and stay away from negative thought patterns such anxiety and fear. Take note that I emphasized the word “performance” as focusing on success can make a trader overly cavalier or cocky, possibly leading to bad trade decisions.
But with the market constantly changing and the number of losing trades you will most likely incur, how can you remain self-confident?
1. Focus on the process.
Almost every trader I know chose trading as a profession to make some dough. But as I’ve said in my one of my previous blog posts, being too focused on the returns of your investment can be very detrimental.
Remember that the market is unpredictable. The fact is there’s really no 100% way for you to know exactly whether or not your trade is going to win or lose. Instead of focusing on your profit/loss statement, why not pour all that energy on making sure that you stick to your trading plan?
You shouldn’t obsess over the outcome of your trade, but rather, think about all the instances you followed your rules. Each time you follow your rules is a success story in itself.
So give yourself a pat on the back every time you exercise self-discipline in waiting for a candle to close before pulling the trigger or closing your trade before the weekend. You may not see the results now, but in the long-run, your discipline will translate in to consistently avoiding mistakes, which in turn translates into confidence and consistently profitable trading.
2. Practice, practice, and more practice!
Do you know the reason why the world-renowned boxing champion Manny Pacquaio spends weeks and weeks training for a fight that can last 36 minutes at most? It’s because through preparation, he develops a sense of confidence through mastery.
Manny doesn’t know exactly his opponent’s game plan is to knock him out. However, through deliberate practice, he has mastered fundamental boxing skills, how his body moves, and his own game plan to be prepared for whatever punches may come his way.
As a trader, you will never know what will affect sentiment and how the markets will react. This means that the key to confidence and success is to prepare yourself each day until you know you can handle any scenario the market can throw at you.
3. Look at the brighter side of things.
Ask yourself this question, “Out of all the confident people you have ever met in your life, how many of them had a consistently negative outlook or attitude?” I’ll bet the answer is a very small percentage or maybe even none. Successful and confident people tend to have a positive or optimistic attitude because when you focus on the positive, you tend to have positive results.
So, instead of feeling bad, sulking in the corner, and eating all the ice cream in the fridge when you’re in the middle of a massive drawdown, be positive and think of how you were able to follow your trade plan properly. Also remind yourself that if you have a well-tested trade plan and risk management strategy, the law of averages will eventually work in your favor, and you will come out on top.
One way to practice this is by actively focusing on the things you’ve done right with every trade, especially if the trade is going against you.
• “Reviewed recent and upcoming economic data?” Check!
• “Analyzed the charts?” Check!
• “Limited my risk?” Check!
By making sure you’ve prepared all you can and focus on that, you are internalizing that losing trades will come no matter how much you prepare. This reduces your fear of losing trades, which gives you more confidence to take valid trade setups and act on good decisions.
Like developing your trading skills, trading with confidence is easier said than done and won’t come without hard work. However, I believe that in order to become a successful trader, one has to have a bit of swagger on the charts. After all, you wouldn’t want to be a soldier marching on to battle cowering under your shield, right?