The Key Essentials to a Trader's Psyche #2:Knowing When to Trade

by Markus Heitkoetter

In order to develop the right mindset, to have a trader's psyche, you need to know what to expect when day trading. You must be prepared for a variety of emotions so that you can monitor them instead of letting them control you. Only by staying on top of your emotions can you stay focused on the key to successful day trading: maintaining a consistently profitable long-term strategy in the middle of many smaller short-term wins and losses, even when these short-term outcomes seem overly distracting. To keep that focus, develop the traits of a trader's psyche in yourself.

Successful traders know when to trade: they trade when their system tells them to. That might seem like an obvious point, but people too often forget it during the excitement of actually having money on the line.

A trader should be governed by his or her system, not by the circumstances of the moment, the market, or the outcome of a few trades. Keep a long-term perspective which focuses on developing a consistent, repeatable strategy. You won't know what is successful or what fails if you constantly change your reasons for trading.

It is hardest to keep this kind of control when you're experiencing losses. But this is also the most crucial time to be consistent. Otherwise, you won't know how to avoid downturns in the future, or how to prevent them from becoming too damaging.

Losses can cause you to do one of the most destructive things a trader can do: rush into trades. Successful traders take their time while selecting trades, and they are picky about which trades to jump on. They don't place orders in a moment of crisis to try to compensate for a loss, not do they trade just for the sake of having a position in the market every second. They act only according to their plan, even if it seems to be failing. There will be plenty of time to revise their plan when they reach their evaluation point.

At the same time, successful traders do not stay in a losing trade. They honor the stop losses that they set, and they do not hold their position in the hopes that the market will eventually â€œgo their way. Too often, people make bad decisions based on hope rather than on a predetermined set of acceptable losses. Know what you're willing to lose, and then lose it if you have to. The individual trade is not what matters: it is your overall strategy. In fact, think of this loss as a gain: what can you learn from this that will prevent you from getting into the same position in the future?

If you can integrate these insights into your own psychological mindset, you'll gain a significant edge in the market. I can't stress this enough: the right mindset is one of the keys to investment success, and most traders fail to understand this.

About the Author

Markus Heitkoetter is the author of the international bestseller "The Complete Guide To Day Trading" and a professional day trading coach. For more free information on day trading visit his website http://www.rockwelltrading.com

Disclaimer: Foreign Currency trading and trading on margin carries a high level of risk and can result in loss of part or all of your investment. Due to the level of risk and market volatility, Foreign Currency trading may not be suitable for all investors and you should not invest money you cannot afford to lose. Before deciding to invest in the foreign currency exchange market you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign currency exchange trading. All opinions expressed are for informational and analysis purposes only and do not constitute investment advice.