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How To Develop The Right Mindset For Profitable Trading

Anyone that has traded for an extended period of time understands the importance of having the right mindset when it comes to trading profitably. In fact, without the right mindset it’s almost impossible to produce consistent results. Moreover, the biggest challenge I’ve seen for many traders is understanding what the correct mindset entails, and then making it permanent so it becomes second nature when engaging the markets.

Back in the nineties I became a futures broker. This was when the internet was in its infancy; in those days those that wanted to trade futures had to do it through a broker such as myself. So, my primary job was to facilitate order placement for customers looking to trade the Futures market. By doing this I learned a lot about the mindset of the losing trader as well as the winners in this arena.

When the phone rang and I answered I could tell by merely the tone of the voice on the other side of the call if the person calling in was a winning or a losing trader. The losing trader was agitated most of the time and would almost always place market orders based on the fact that the market was moving. The other factor in their decision to get into the market right away was fear of missing the move that was currently underway. Almost without fail the market would turn against them shortly after the order was filled. They would then call and nervously give me a stop loss order. I would place it and, a few minutes later as the market would come close to the stop, like clockwork, the phone would start ringing. Yes, it was my customer wanting to move the stop away from the market. The fear of losing would not allow them to get stopped out. Ironically, this emotion would keep them in the trade until they would call in a panic wanting to exit the trade as the loss was exacting an excruciating amount of pain. This, invariably, was at the market lows. This would happen repeatedly until the customer either got so frustrated that they would quit or they would simply run out of money.

Notice the mindset of this trader, always chasing price, always fearful of losing and changing his mind constantly. They had no plan and couldn’t follow rules.

In contrast, one very successful trader that I had the privilege to have as a client, had a much different mindset. When he would call he was almost always relaxed and jovial. He would know precisely what conditions needed to be in place in order to enter the market and would let the market come to him by placing limit orders. He would also, on occasion, scale into his trades. In addition, he always had an exit strategy for when the market didn’t do what he expected and would execute it flawlessly without fear or hesitation. One thing that really struck me about this gentleman was that he would laugh sometimes when he exited a trade with a loss as if it were a joke. I would think to myself, wow, this guy just lost a few thousand Dollars and he thinks it’s funny. He would say something like, “You can’t win’em all; we’ll get the next one.” So he had an almost cavalier attitude about losing. I think this mindset came from his confidence and belief in his trading system, which I personally saw produce extraordinary results.

The winning trader’s mindset was much different than that of the emotional losing trader as you can see. What can be learned is that a healthy attitude about losing, having a strong strategy and the confidence and discipline to follow it is paramount to success in this business. This does not come easy, however, but can be cultivated and harnessed with the right training.


Written by Gabe Velazquez, Online Trading Academy Instructor. Gabe got his start in the markets as a broker trainee for Paine Webber, a mere 3 months before the market crash of 1987. He witnessed the gut wrenching fear of investors during that time period and the wild speculative euphoria of the late 90’s. That experience brought to light the importance risk management plays in trading and investing. In fact, it’s greatly influenced the way he trades today. He spent 15 years as a stock and commodities broker, conducting technical analysis seminars through-out Southern California. After many years of managing other people’s money, Gabe now concentrates full time on trading his own portfolio and teaching. Students will benefit from his first hand experience of daily involvement in the market. He brings with him an acute awareness and understanding of how the markets really work. Articulating this knowledge clearly, succinctly, and with enthusiasm is something students can appreciate. This gift for communicating was honed through many years of public speaking.


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