What makes Formula 1 racing champions? Is that a car? What technology is the engine built with? No, it’s the driver. The driver’s confidence in corners and the patience to face the tough challenges of other racing drivers are what make a champion. Likewise, the trader makes the difference when trading stocks and options. It is the confidence of stock or options traders in their chosen methodology and their patience in the face of discouraging price fluctuations that make stock or options traders champions.
Trading confidence and trading discipline are the most important aspects of trading psychology that make stock millionaires or options traders. They are also the main reason so many stock and options traders fail and break the bank.
Trading Trust is a bank account of mental trust in every trader and trading discipline determines whether you deposit or withdraw from it. Confidence in trading enables any stock and options trader to confidently trade their chosen method and stay in the game despite the losses, knowing that they will ultimately lead to more gains than losses. A trading trust is a bank account that you can deposit or withdraw from. Every time you lose money, withdraw from your trading trust, and every time you make money, you pay into your trading trust. When your trading confidence is zero or goes bankrupt, you will hesitate before taking any trade while imagining the pain of losing another trade. You will have sleepless nights and at the first sign of danger will rush out of trading and make unnecessary losses. When that happens, it’s time to get back on paper and review the way you act. In fact, you don’t have to damage your trading account to bankrupt your trading trust, and a bankrupt trading trust always leads to a bankrupt trading account. Instead, every time you make money using your chosen method, you pay in to your trading trustbank, feel confident and happy when you trade, and don’t panic if a trade goes wrong.
Factors Affecting Trade Confidence
The main determinant of your trading confidence level is the amount and type of money you should use to trade. The more money you can afford to lose, the higher the confidence level of your initial trade. Stock and options traders who can only afford to lose a small amount of money usually have very low trading confidence as each loss challenges a significant bite out of their trading trustbank. Again, you don’t have to lose all of your money to lose all of your trading confidence. Some stock and options traders no longer feel safe enough to trade when their accounts drop 30%, while some who reach that level of confidence won’t go bankrupt until their accounts drop 70%. The type of money you should use to trade will also determine your initial trading confidence. If you are trading with excess money that you do not need, your trading confidence level will be very high. In fact, even if you lose all that money, your trading confidence can still be high. Conversely, if you are trading in borrowed money that you have to repay in installments and with interest, your trading confidence will be very low as any losses will make it difficult for you to repay the money.
Unfortunately, there is no objective and empirical way to calculate the confidence level of your trades, and most stock and options traders only understand it when they go bankrupt.
At this point it is clear that in order to build a strong trading trust bank account, you need to make money, and in order to make money you need to follow proven and successful trading methods. The losing method will destroy your trading confidence in no time, no matter how much you start out.
Once you are sure that you have a proven and successful method in place, you need trading discipline to make sure you follow the rules and only trade when the entry requirements are fully met. Without trading discipline, you will eventually undermine a successful methodology, leading to a loss of your trading confidence.
Trading discipline consists of patience and a calm and objective mind.
Each trading method only trades if certain settings or rules are met. Without trading discipline, you will not have the patience to wait for these settings or rules to be fully followed before trading, and every time you break the rules you will increase your ratee probability of losing and all losses are beyond your trading confidence. Therefore, do not make “fun” or “experimental” trades by compromising the rules, as losses under such conditions will also take away your trading confidence.
Trading confidence and satisfaction
A distinction must be made here between commercial trust and satisfaction. Complacency does not come from a high level of trade confidence, but from a lack of trade discipline. Complacency always leads to quick and complete bankruptcy of trading trusts, so make sure you understand the difference.
Trade psychology – conclusion
After all, the relationship between trade trust and trade discipline actually goes both ways. Strong trading discipline following a proven methodology builds strong trading confidence, and strong trading confidence also encourages developing strong trading discipline as you experience the success that comes from following the rules. The Star Trading System is one such system. Only when you have trading confidence and strong trading discipline will you have the trading psychology you need to make millions.