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Bulls on Wall Street: Stop Guessing. Start Trading.

trading confidence

How can you maintain confidence when you know there is always a chance that you could be wrong? Many traders struggle maintaining confidence with their methods, even when they are trading a proven strategy. This results in self-destructive tendencies that cause traders to go on huge losing streaks, which sometimes ends in a blow-up.

Hesitating on pulling the trigger and missing a big move. Stopping out before there is a sell signal and missing a move. Getting in and getting out constantly.

All of these are the result of low confidence. In order to rebuild your confidence, you have to have to know 3 simple facts about the nature of trading:

Losses Are Not Personal

One of the biggest causes of a loss of confidence is traders taking losses personally. In the real world, losing money is considered a negative event. The stock market is one of the few environments where losing money should not be considered a negative occurrence. In order to make money trading, you have to risk money.

You cannot be in winning trades without embracing the risk of potentially losing money. Even when you trade setup with a 70% win rate, 3 out of 10 times you take that setup will be a loser. Whenever you take a loss to remind yourself that this is just the price to you pay to see if the trade will be a winner. You cannot be in winning trades without risking the possibility of it being a loser. There is no logical reason to feel bad after a losing trade.  

Each Trade Is Independent

Whatever happened on your last trade has no impact on what will happen in your next trade. Inexperienced traders think that because their last trade was a winner their next trade will be one as well. They also have the tendency to think because the last trade was a loser the next trade will be as well.

When you don’t understand that each trade outcome is independent, you create a self-fulfilling prophecy in the markets. When you have a bias to believe that your next trade will be a loser because the last one will be, you will subconsciously look for price action to confirm this belief. As a result, you stop looking at the market objectively.

This results in you going on huge losing streaks, and your confidence getting crushed. When you embrace this belief, you stop caring about what happened in the last trade. Eventually, you will start to feel more pain from missing your go-to setup than from losing money. When you make this shift, you are well on your way to becoming a winning trader.

"Target or Stop" Mindset

One of the biggest issues losing traders have, especially day traders, is micromanaging trades. They take a position in a stock that gives them a setup they are familiar with. However, once they are in the trade, they over analyze price action and convince themselves that the trade is not working because of the price action.

There has been no sell signal, yet they get out of the trade because they convinced themselves it will turn into a loser. As we mentioned above, this occurs most often after the trader has had recent losing trades. You should enter your trades with this simple mindset: “This either gets to my target or hits my stop”.

This will make whatever price action that happens in between those two prices irrelevant, and make your trading much more simplified and less stressful. When you are trading a strategy with an edge, this mindset will allow you to trade with confidence because you are staying out of the way of a potentially winning trading.     

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About Nick P

Nick is a former student of Bulls on Wall Street, and has been trading full-time for 3 years now. He is primarily a swing trader, but mixes in the occasional day trade when there is a great setup.

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