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Trading PsychologyThis Foundational Mental Skill Will Make You A More Effective Trader —...

This Foundational Mental Skill Will Make You A More Effective Trader — TRADING COMPOSURE

About 90% of you will read the title of this post, and think you’ve figured out the article. 55% will read the post for 15 seconds or less, and only about 10% will read it thoroughly. A 2016 study confirmed this.

But why is that?

Two reasons:

1. The inability to concentrate.

2. The entrenched habit of looking for short-term emotional gratification.

And those are the reasons why success in the market remains elusive for most traders.

Picture a monkey jumping from branch to branch. That’s what our minds are like most of the time. They’re restless, unable to stay put… and this is easily observed by trying to quiet your mind. Within a few seconds or minutes, you’ll notice that you actually can’t. You feel bored; you experience a strong urge to get to something more entertaining or “productive.”

What’s more, the temptation to follow that impulse is incredibly strong. “I’m going to sit here and read this article fully”, you might vow to yourself. But at the same time, there’s a voice in your head urging you to look at something else. And the feelings in your body make this thought even more pressing.

Your mind is constantly looking for some cheap dopamine shot. That’s what’s happening. Dopamine is the happy hormone that most of us are addicted to because we’ve conditioned our minds that way.

And your mind constructs sophisticated rationales so that you don’t feel guilty about that addiction. So, after about a minute or so of trying to focus and read this article, you’ll eventually give up. You’ll jump to a conclusion and say to yourself “No need to read it, I already know what the post’s about.”

[If you’re still reading, thanks for sticking with this one!]

Most people have been doing this for so long now that they’ve become content to live with such an undisciplined mind. It’s become automatic… like second nature. And technology doesn’t help. Our minds have taken us millions of years to adapt to our environment, but the torrent of information coming to our senses nowadays and the new technologies that feed it to us are new… so new that our minds haven’t evolved to deal with them appropriately.

So, in the meantime, we indiscriminately install time-wasting apps on our smartphones; we jump at text messages, emails, and social media notifications… and our minds have become addicted to short-term emotional highs.

And our capacity to focus? Forget about it… it’s at record lows!

Don’t get me wrong, I’m not telling you that you should dump your phone in the trash can. To be clear, the problem is not technology, rather it is our indiscriminate and undisciplined use of it. We need to create internal rules to structure our use of technology and reclaim some of our powers of concentration.

Checking your phone and your PnL 100x a day, wasting time on social media looking for confirmation of your biases, doing what’s easy to do instead of doing what you should do… all these things are junky behavior.

And when turned into habits, they weaken your attention. Your mind can’t filter out irrelevancy anymore. It becomes chronically distracted and lost in its own stories. And this makes you less productive, less capable of reaching your goals in the markets, and less happy overall.

In the market, if you:

– Can’t focus on one strategy

– Never have the patience to wait for your signal

– Can’t manage to let your trade work without constantly checking where your PnL is at

– Constantly seek to micro-manage your trades

– Are overly happy when you win and depressed when you lose
…then “Houston, we have a problem.” You can’t be successful as a trader with an undisciplined mind. But the way you begin to fix this is by first rebuilding your powers of concentration.

The feeling of “flow” on demand is what a well-trained mind is all about.

Once again, when your mind is pushing you towards short-term emotional gratification at the expense of your long-term goals, you are conditioning it to be more like that–more impatient, short-sighted, undisciplined, addicted, and weak.

When those qualities become the norm on your mind, they pour into everything you do–and yes, even trading… especially trading!
The only way to begin correcting this impulse–this addiction–is by first becoming aware of it. You can try that right now…

Try to become aware of the feeling in your body at the moment.

Are you feeling impatient?

What is the precise feeling in your body?

Do you want to rush the reading so that you can tend to something else–Youtube? Candy Crush? Social media scrolling?

That feeling of discontinuity, the “jerkiness” of being pulled out of concentration, is what we want to overcome.

Now, compare this with the feeling of “flow”: being immersed in an activity with uninterrupted concentration. Some might refer to this as “the zone.”

Close your eyes if you can and really try to get a sense of what that feeling is. The feeling of “flow” is what a well-trained mind is all about. This is mental strength! And you can learn to develop this state at will.

If you can make the cultivation of flow a daily habit, this is a very powerful springboard to success.

Give it a try:


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