A trader I work with said to me, “If only I could be more confident, I’d be a good trader.” In response, I asked, “What do you think would give you more confidence?” She said, “Do more winning trades.”
Unfortunately, that’s the wrong answer. She thinks her results will give her the confidence she’s looking for. It is what most aspiring traders think.
Where real trade confidence comes from
Developing lasting confidence in your real-time trading skills and abilities doesn’t happen overnight. It’s a process. And it’s the ‘getting there’ process that we focus on improving and ‘being a good trader’. Confidence comes from mastering the various skills required to read the market, execute trades and manage them. Mastering these skills and abilities is the process of acting and it is this process that instills confidence. Confidence doesn’t really come from more winning trades. In fact, more winning trades come from a dedicated focus on the process.
Keep improvement and give more confidence
A key to both building confidence and maintaining the skills and abilities you’ve developed thus far is understanding how we learn. While we can certainly learn quickly, learning cannot be rushed. This is especially true for the versatile skills required in trading. Far too often I see traders try a strategy or indicator, have one or two losses and drop that strategy like a hot potato. Again, their focus is on results. This flawed mindset will only frustrate you; lasting improvement and true confidence will always be elusive.
Learning is not linear. It doesn’t happen in a straight line. We don’t start at point A and move steadily to point B. Instead, learning takes place in a series of ups, downs and plateaus. It is very similar to the swings that occur in an uptrend. We experience spurts of growth and development, fall back a little, move forward a little more and then rest for a while as we reach a new plateau where we consolidate what we have learned.
Traders with a misguided mindset are excited about the ups, depressed by the downs, and bored with plateaus. Again, their focus is on results. How can anyone really trust such a roller coaster?
Where trade confidence is really found
Confidence is found in the learning plateaus where our profits are consolidated and our capabilities stabilize. Confidence is not found in the ups as that is not our real skill level. The learning has not had time to hold. The lows of our learning curve are not places to get scared or depressed. The downs are to be welcomed. Why? Because here we learn what else we need to get better. Where else would we get this crucial information? And the plateaus are not the place to be bored; they are to be enjoyed.