It goes without saying – in life, if you want to achieve success in anything whether physical or mental – you need to have the right skills. In some professions having mindfulness at all times does not account for much. I am not discounting the fact that ‘mental strength is required’ no matter what we do. Even in physical training and sports – there is more emphasis on the state-of-mind side of things, rather than the actual sport itself. If you ask a swimmer or a boxer – they will say it’s both – mental and physical. Nevertheless – skills and mindfullness are equally important.
When strarting something new – skills give us the right start in our mental approach. Skills give us the direction to focus our mental energies towards achieving our goals. Skills give us the mechanical approach to handle a situation without having to do much thinking. Skills give us the tools and methodologies to crack common problems and repeated event occurrences. They also enable us to execute a plan of action – once the situation is identified.
Skills can teach you to stay afloat. Skills can give us a surviving chance. However, beyond the tasks and activities we do using our skills – lies a sound thinking methodology that makes those skills work. Some of these skills are developed over time and passed on from generation to generation. Highly successful traders possess this mentality – to be able to adapt and develop thinking methodologies and strategies that lead them to achieving their goals.
Skills are extremely important to avoid common pitfalls and identify issues before they happen. For instance in trading, a trader identifies a condition and takes preventive action, and avoids a situation that could lead to a potential loss.
In a separate post, I highlighted the important do’s and don’t of trading, without differentiating the skills and thinking behind trading.
1. Setting realistic goals: Often novice traders tend to trade aggressively, and usually after they see some degree of success with a few trades. They start setting unrealistic targets that are hard to achieve, and end-up making big losses. If you take proper coaching and learn risk management rules, then you will be more aware of the risks you are taking and avoid making costly mistakes. Learning to be patient for the right opportunity is the right approach to trading, rather than setting future ‘earning targets’ that could have an adverse effect on your mentality and can pressure you to take trades that you shouldn’t be taking – even in situations when the opportunity is not worth taking the risk for.
2. Learning to staying positively focused: Human emotions can turn a winning trade in to losing one, and vice versa. Therefore’ it’s important to stay focused on your goals and be in control of your emotions when trading. Learning to overcome your fear and greed when in a trade can have a huge impact on your overall earnings.
3. Adapting to change and constantly learning about the market: Never ever assume you know more than what the market already knows, or in other words assuming that you know more than what the other traders know. This could lead to a wrong state of mind, and one in which you will fail to adapt to the rapid shifts in the market. You should always try to sharpen your knowledge about the stocks and commodities you trade, whether you’re a long term trader or a day trader – having the right frame of mind will help you succeed.
4. Developing the courage to take actions: Courage comes with either being naive and not understanding the risks, or having a firm grasp of the market and having a clear strategy to trade. This also relates to timing your trades accurately and taking actions when required. The same is also true when it comes to ending a trade. Holding on to a losing or winning trade for too long is not advisable. When faced with the situation- experienced traders can offset their losses using arbitrage and other strategies, but as a beginner you must develop the mind-set to only take the losses you’re comfortable with, and also exit trades once you have reached a reasonable level of profit taking. You should seek to learn when the market is telling you how much profit or loss is enough and when it calls for an action to close the trade.
5. Learning about yourself: In trading an equally important battle is to be won inside yourself. Leaning to control your emotions and learning about the emotions that drive your actions is key to becoming a successful trader. Learning to develop a positive state of mind and maintaining it throughout your trades is vital to winning trades. One must learn to trade for trading itself and not for the thrill of trading.