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How To Develop Mental Toughness in Your Trading

In trading psychology, mental toughness is all about doing what needs to be done in order to trade well. It is taking the actions necessary to keep yourself in the trading game. When a trader makes a mistake or suffers a loss, it can often mark the beginning of a downward spiral. Things can quickly go from bad to worse. Feeling pressure, more mistakes are made, and perhaps more losses are suffered. How does this happen?

How Mental Chatter, Stress And Emotions Take You Out Of The Trading Game

When a trader makes a mistake or suffers a loss, the naturally tendency is to go inside and begin to focus on what the mind is saying, on our bodily sensations, and how we feel. This is nearly automatic.

After a loss, for example, you might hear your mind say something like, “Another loss! It’s the same old thing. I’m never going to be successful in trading. I’m a loser.” Pretty depressing, isn’t it? How can a trader trade well when they buy into such thoughts? Believing such mental chatter will take you right out of the trading game.

Such self-talk will also tend to produce stress. We might experience stress as tight muscles, a queasy stomach, or sweaty palms. A trading event such as a loss is interpreted by our mind (in this case as a threat) and causes our body to automatically respond. The queasy stomach and tight muscles seem to confirm what we are thinking. But attention has shifted off the market to the queasy stomach and it becomes difficult to make good trading decisions.

Negative emotions such as feeling down and perhaps even anxiety and fear are also a normal response. Emotions tend to take center stage and the natural desire is escape the negative feelings and unpleasant physical sensations. Again, the center of attention is inside, not on the market.

This focus on downbeat internal experiences takes the trader out of the trading game. To trade well, focus needs to be external, concentrating on the market and finding the next choice trade. No one can trade well when their attention is on what their mind is saying and how they feel.

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Three Tips For Mental Toughness

Here are three things you can do to keep your mind and body focused on the trading:

Be aware of what is going on in your mind, body and feelings. Slipping into an internal focus seems automatic because we aren’t fully aware of it as it is happening. Being aware of what the mind is saying and how we are feeling is the first important step in mental toughness. You can catch yourself before things spiral out of control.

Know what trading actions are important to take. These are high-value actions (HVAs) under the trader’s control. HVAs are relevant to trading and include identifying sound trade setups and solid entry triggers. You must know these cold and be ready to execute them.

Commit to high value actions regardless of how you feel. This means being willing to accept unwanted thoughts and feelings because trading well is more important than feeling good. Maintaining an external focus and initiating positive trading actions may not be easy when feeling down, but it’s certainly not impossible. Like all skills, it takes practice.
Practicing mental toughness can be made easier with a sound understanding of trading psychology. Here is a free, seven-part e-course on how to develop mental skills specific for trading.

You will receive weekly emails detailing practical trading psychology tips you can immediately use to improve your trading and develop your mental toughness. At the end of the series, you will also receive a bonus – so there are eight great tips in all!


Written by Dr. Gary Dayton


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