Sometimes I get some really weird questions in the mail. The one below is one of them. Although I try to be like “Rambo” when I operate, I haven’t really reached the degree of “coldness” of “Rambo” completely.

“Joe, is it really true that you are able to remain calm and relaxed when trading? Are you saying that you have never cracked under pressure?”

There were times when I made mistakes under pressure, but I don’t remember ever breaking down under pressure. By that I mean I didn’t panic, but I was close. Being short soybeans when Chernobyl exploded was probably the closest thing. I have made some big misconduct: I once sat down and lost $45,000 in a matter of minutes because I tried to trade while teaching a student at the same time. Lesson learned: never trade and teach at the same time. Stay focused on one or the other. I once woke up to a $21,000+ margin call, but it worked out in my favor. By mistake, he had left a batch of 5 on the market overnight, thinking he had no money, as a result of careless cleaning.

However, I have learned to trade in a relaxed but focused manner. I don’t put unnecessary pressure on myself. I don’t allow myself to stress, it’s just too expensive to do.

I don’t think I should be successful in any trade; I keep my focus on the big picture. I don’t think you should be right. I am not trying to impose my will on the market. And I definitely do not try to predict the future of the price movement. The market is the market: it does what it wants to do.

What I do is keep a close eye on market conditions and movement, and come up with a detailed plan of attack. I trade what I see, allowing the market to take me where it wants to go.
I try very hard to stay calm and relaxed and ready to act on whatever happens next.

Once I have a trading plan, I follow it. I don’t doubt or guess my plan. I meditate on my plan and imagine carrying it out successfully, before entering into a trade. I really believe in mental images as an important activity.

I go in and out of trades without worrying about the consequences. Worrying has never helped me trade well. Worrying is wasted energy. By staying focused, I can see trading opportunities more easily and that allows me to take advantage of opportunities when they arise.

Trading is a lot like playing sports. Players must remain objective, calm, and not collapse under the stress of wanting to be “the best” or “perfect.” I am definitely not a perfectionist.

I remember a year when college football fans watched what happens when a team seems to be playing “so perfectly” that some say they are “invincible.” All season long, the Oklahoma Sooners had been winning, and winning big. They were the only undefeated college football team, until the day they lost by more than three touchdowns to the Kansas State Wildcats. What’s surprising about this loss isn’t that the Sooners lost, as even the best teams can lose from time to time. It was the way they lost and how they seemed psychologically defeated. After making their only touchdown in the opening moments of the game, they seemed dazed and shocked for the rest of the game. They couldn’t get a single touchdown. It was unexpected and hard to believe. One commenter said it was like the bully who had never been hit. They knew how to win, but when they were upset and down, they didn’t know how to get back up. Sooners quarterback Jason White said, “They put pressure on us and hit us a couple of times.” And as the clock ticked down, Kansas State had another touchdown, then another, and then another. During the final minutes of the game, an announcer said of the Oklahoma team, “They just want to lick their wounds and go home.”

From a purely psychological perspective, one may wonder what would have happened if the Sooners had lost one of their first games. Maybe they would have learned to bounce back from a setback, and when they were down a couple of touchdowns, they could easily have come back for the win. It’s like what some hedge fund managers say about good traders: “The best traders are those who have blown their accounts a few times. They know what it feels like, they know how to bounce back, and they are not haunted by the possibility.” plus.”

Although it’s unpleasant to think about, it’s worth considering the worst case scenario and making a detailed plan to recover from it should it happen. It’s just a strategy to learn how to trade without worry, so that if you face a severe financial setback, you can bounce back. So-called “zone trading” requires intense concentration and focus, and it’s hard to maintain this posture when the pressure is on you to perform. Therefore, you should do everything you can to reduce the perceived psychological pressure. The most obvious way to alleviate that pressure is to think in terms of probabilities and carefully manage risk. It is useful to remember that you may not win on a single trade; but after a series of trades, you will have enough winners to make a profit in the long run. It’s also important to manage your risk. Determine your risk in advance and risk only a small amount of trading capital on a single trade. Doing so will relieve much of the pressure, allowing you to be more open to seeing opportunities in the market. Don’t collapse under the pressure of a life-threatening financial defeat. Consider the possibility and be prepared to recover from it.

joseph ross

Trading Educators Inc.