Trading psychology and the role of subconscious mind

Psychology

How many times have we heard this word ‘psychology’ getting associated with trading profession? Innumerable times. To the uninitiated, it seems to be an over-rated (probably abused) word. I will make an attempt to give a different perspective about psychology’s part in trading as there are lot of literature that talks about cliched topics like ‘handling fear/greed and discipline issues’. We will not focus on those items in this blogpost.

To all the readers reading this post, have you ever faced any of the following issues?

1. Not taking a trade in your plan because you did not think it would work (after a couple of losses in a row)?
2. Taking a trade immediately after a loss that is not in your plan? And then after another loss, another trade not in your plan?
3. Chasing a price move because you are afraid it is going to run without you only to see it reverse after you jump in?
4. Averaging into a losing position because you just believe you are right and price will come back to where you bought?
5. Moving your stop further away from your original stop to give the trade more room or moving to breakeven too early?
6. Continuous counter trend trades because you feel price has moved too far and you expect a reversal?
7. Refusal to close out a losing trade and holding it until later in the day or the next day taking a bigger loss than your original stop?

If you haven’t had any of these issues, please stop reading this blogpost further – you are either a master/legendary trader or have never traded before!! Chances are if we have had several of these happen to us, we either have no trading plan or should not be trading or our mindset around trading needs some work. We can call it psychology, call it mindset, call it mental discipline, or whatever suits our fancy.

The difference between unsuccessful traders, net profitable traders, and big money making traders is smaller than we think. It usually boils down to a small but perceptible edge, and while it can be related to poor money management, inadequate funds, or a bad methodology, it is usually an internal factor – a lack of discipline, emotional control, patience, and especially an improper attitude about losing and risk. Mind you, all these factors collectively called as ‘trading psychology’. So, it does not matter what we call it, but the intrinsic difficulties are real and they reflect in our trading P&L.

But to understand this phenomenon more deeply, we need to understand how mind works and how it relates to trading profession. Let’s start by dividing the mind into three divisions – inner subconscious mind, the subconscious mind and the conscious mind. We’re not going to talk about the inner subconscious mind (its primary function is to run our organs automatically) and the conscious mind (as our emotions are not relevant to them). Our focus will be on the ‘sub-conscious mind’. On a daily basis, we spend about 1-5% in the conscious mind. The rest is spent in the subconscious mind. The conscious mind perceives about 40 bits of information per second and on the contrary, the subconscious mind about 20 million bits of information/second. As they say -“Your brain (subconscious mind) sees even when you don’t”. And it’s never dormant. In fact, it has been awake and recording since the time we were a fetus.

Subconscious mind and the way it works

Subconscious mind can be divided into 3 subsections –

1. The Memory Mind – It has recorded all our memories, all events, and actions, everything that ever happened in our life since the time we were a fetus. Think of it as a video camera with five senses. All of our memories (from brain’s inception) are there and they are present constantly in every moment of your life.

2. The Emotional Mind – It’s the part that contains all of our emotions. Whenever we act, react on an emotional basis, the subconscious mind is involved. Have you ever thought of that situation when we reacted so silly, and we asked ourselves later, why in the whole world did we react like that, or why did we say that? It’s because of the emotive information that’s stored in our subconscious mind. Remember, that conscious mind has no role here – analytical part of the brain (part of conscious mind) cannot even start processing the information yet.

3. The Protective Mind – It has the role of protecting us against what it perceives as dangerous.

How subconscious mind is built

The basis for sub-conscious mind is created from day zero of our life till the age of about 7. That’s because, our brain waves, in that period are in a kind of hypnotic state. They move very slowly, and our whole subconscious is very much completely open. During these years, we lack the critical factor –the analytical and rational mind. And that means that every little thing that’s put there (not that it stays there) creates the fundamentals of our character, and our outcomes in life.

Subconscious mind and need for security

We understood how the mind is built but who’s putting in the information? Well, most of it comes from our parents or the people who raise us up. They are the ones in charge of our lives. One of our primate need is the ‘need for security‘. As I have a 8 months old baby now, I can give an example w.r.t to a baby. Normally, when a baby starts crying, it is taken up by the mother, it continues to cry. The mother checks the diaper, changes it. The baby keeps on crying. The last step – the one that always works – is to bring the baby to the bosom and feed it with breast milk (or stick a bottle with milk in its mouth if one is not breastfeeding). That’s when the baby finally stops crying.

What’s actually happening? The need for security is fulfilled. Being brought up to the bosom, the baby feels the warmth/care from the mother and the need for security is fulfilled. The only problem, is that it creates an association. The brain creates that association to food. In other words, when I get food, then I’m secure. We grow up, and every time, we had a stressed day or we feel depressed, we find ourselves putting something in your mouth. If we start to abuse food, we give birth to obesity. But, remember it has to do with the need of fulfilling ones security. Other quick examples are classical as well. Just think of how many parents out there telling their children, things like “you’re not worthy”, “you can’t do that”, “you’re bad”, “you’ll never be able to” and so on and so forth. So, it is prudent for a parent to watch what they are really telling their kids as that information is shaping up our kid’s future (more so, when they are in their young/blossoming years).

The real us, is our subconscious mind, because we’re spending there about 95% of our daily lives. The subconscious mind is this device ‘playing on’ the program we got and it is put there by our parents and by society.

Subconscious mind and trading

Ok great!! But, what does all this has to do with trading then? Have you guys ever heard of, fear of success? We do want to make money, we love money, we love trading but we’re still losing money. What we’re experiencing here is a conflict between the conscious mind and the subconscious mind. Remember, who the real you is! We’re actually the sum of all our programming. Funny thing right? So, being the sum of all our programs and given the fact that subconscious mind has the role of protecting us – Bingo, we got a great recipe!! It doesn’t allow us to make money. Because somewhere in the program, we’ve got a bad experience that has a negative charge and it keeps holding us back from getting hurt again.

See this innocuous looking statement – “In order to earn money, you have to work hard”. It has probably been put there, somewhere between the age of 0-7. Unfortunately, our parents became parents without getting any instruction manual on how to raise kids and we have the social construction as well in the picture. Nothing against the parents here but just wanted to put the facts across. Our parents inadvertently created ‘reward and punishment’ mechanism. They punish us when we’re not following their instruction and reward us when we do as we’re told. The kind of reward we get is, acceptance. When we get that acceptance, we then fulfill one of our basic needs – the need for security.

This creates a dogged association here –”In order to earn money, we have to work hard” which in turn equalizes to ‘safety’. We grow up, and start to work, and eventually we find out that, working hard equals earning money. And the safety need is fulfilled. Now, fast forward few years and you enter the arena of trading. We get into situations that can make us money easily, without having to work hard. BANG – That’s when we blow it!!

Dealing with the core issue

It is very difficult to buy this concept. I understand that. Personally, it took me a while before I finally had the courage to face it, and to understand that, it doesn’t matter how I take it or perceive it, by my conscious mind. The subconscious plays the lead here. And no matter how much I refused to accept that, it wasn’t that way. Any amount of self-talk and affirmations were not helping here and the subconscious mind just snickered back at me by decreasing my account. This was of course a very basic example but am sure you get the drift. There are various ways of overcoming this obstacle – NLP (Neuro-linguistics programming), Hypnosis and many more. I do not want to dwell in to those vast topics in this blogpost but I hope I have enabled the readers to think in that direction.

Bottom line, discounting psychology is the same as discounting your mental health. Psychology doesn’t mean seeing a shrink. It means being aware of your mind and its behaviors. Surely, we are not going to try and make an argument that mental health is unimportant. Skill is composed of more things than just physical prowess. There is also mental aptitude. And in order to exercise our mind, we must at least accept that psychology (and the subconscious mind) is not a “prank”.

Happy trading all !!

Egoless trading, the best trading strategy of all

Egoless

There was a small surge of direct messages in twitter this weekend on why I should not bother about people trolling about the recent drawdown in my daytrading activity. I casually mentioned in one of the tweets that “My ego and self-image are not attached to trading success” and it made me thinking on why people give priority to ego over making money in trading. Hence this post.

Ego and trading – If we have to make an attempt to extrapolate on what Albert Einstein said “More the knowledge, lesser the ego and lesser the Knowledge, more the ego” into trading, we could say something like “More the trading success, lesser the ego and lesser the trading success, more the ego”. A regularly encountered view in writings on trading psychology is that a trader has to let go of ego in order to attain that ephemeral trading success consistently. In simpler terms, we can say that ego is inversely proportional to consistent trading success.

Ego and prediction – In order to understand how ego clouds our judgment in trading related decisions, it is imperative that we understand on why people are enamored with ‘prediction’ so much. Think about this scenario – a trader calls a move (market will go up from here or go south) and try to lead the markets (or at least expect the market to move in the direction of his prediction). On the other hand, a sound trader usually lets the market to lead and takes his cues from the market’s moves. But, when a trader embraces prediction, he seeks to lead the market. So, it boils down to the trader – ‘us’.

If we’re making a market call and looking for confirmation (often called as ‘confirmation bias) by forestalling a market move, then it will be particularly annoying if and when that move doesn’t materialize. We no longer feel endorsed and the problem exasperates even more, when we announce our prediction to public. If a trading decision is not about us (or about the ego that drives prediction), being wrong doesn’t feel like being stupid. Being wrong becomes information – an information we can use to hone/fine tune the trading decisions.

Ego and conviction – The usual trading coaches tell us to trade with confidence and double down on bets when we have our greatest conviction. It is as ironic as William Eno (“Father of Traffic Safety” – invented the stop sign, crosswalk, traffic circle, one-way street, and taxi stand) who never learned how to drive. In fact, listening to markets and following its lead requires the utmost of humility and open-mindedness. The trader with supreme conviction is the one most likely to be blinded as markets change their direction. Conviction and ego are like twins.

Ego and stubbornness – If one is successful in trading, he will also exhibit enormous patience as patience is every successful trader’s virtue – without exception. Patience comes with a sense of calmness and confidence. We know we are doing the right thing. Thus, there is no need to justify excessively (excessive justification often leads to confrontation with others to defend the supremacy). On the other hand, stubbornness often comes with anxiety and over-justification. When we find ourselves trying too hard to explain what we are doing, we are being stubborn. Stubbornness can also be construed as mild form of ego. I always tell folks that Obstinate traders become obsolete, sooner or later.

Antidote for trading related ego – So, how do we tackle this ego then? ‘Balanced life makes for balanced living’. We need to live a fulfilling life outside of trading. If we don’t need markets for our self-validation, we’re less likely to seek those “good call” compliments (from others – this seems to be a big problem in social media like twitter), and we’re less likely to make our profit/loss statement a barometer of our personal worth.

If we make trading as a medium for satisfying our ego, then trading can be a very expensive profession to be. Fulfilling the ego outside trading gives that ‘much needed’ room for the traders to operate at optimal level and start the path towards consistent trading success.

Women and trading success – I cannot end this post without mentioning this point. If you are a woman reading this article and a trader, you have a brighter chance of making it in trading. And am not throwing this stuff out of thin air. Strong reason is there. Women simply don’t seem to have the mental blocks and ego barriers that males have (some women do though but we are not talking about exceptions). They are more readily able to learn from their mistakes. A man will repeat the same mistake over and over again, unable to admit to himself he is wrong because of his ego. Women also listen to those they consider experts. Men usually consider themselves experts at everything already, so while they may listen to what a real expert says, they typically don’t do what they are being taught.

Happy egoless trading !!

Basic pillars of trading success

Impatience

When I first started full-time trading, I was always looking to find/figure out a system with best win-rate and highest return possible. As years passed by, I came to terms with other tenets of trading that ‘actually’ makes the difference in shifting from unprofitable to a consistently profitable trader. This post is about those tenets and it might sound trivial to seasoned traders but it is always good to revisit basics every now and then. We tend to ignore the basics as we move on (this applies to all kinds of profession/business).

1. Trade Plan – In order to be successful, we must have a detailed trading plan that we trust, respect, and most importantly — follow (easier said than done, right?). We wouldn’t decide to build our next home from scratch without blueprints/floor plans, why would we step into trading without a plan?

Firstly, we need a written plan that goes over rules. I repeat – ‘written plan‘ covering every scenario of our trading profession. These are when we will, and when we will not trade. I am not just talking about technical analysis, I am also talking about “I will not trade when I am not 100% focused and in the zone”. “I will not trade when am traveling or my dog is sick” The trading plan also needs to describe, in detail, our trading methodology. Describe our setups. What actions do we take when we get stopped out? What actions do we take when a trade is going against us?

Secondly, we must be ready to execute our trade when our setup shows up and meets all of our rules. If we hesitate as the market unfolds, we can/will lose money.

Hope we all have written rules and read over them every day to make it second-nature. After few months, we should be able to say if we have a setup or not in 20 seconds (looking at any chart).

2. Focus – Trading profession must be respected. We must be focused. Disciplined. No two ways about it. We can’t have constant interruptions and distractions around our workplace if we expect to become a good trader. Many traders say it is like war, we are literally doing battle for life or death in the trading world. This is the only profession I know of, wherein we put a part of our net-worth on line every single day. How can we expect to win if our phone is constantly ringing, or if our kids are playing in our office, our dogs barking, or if we are replying to emails/forum posts? I don’t think those things would go over well in a real battlefield. The amount of respect and diligence we give to a profession is directly proportional to the level of success in it (Work is Worship)

Our trading environment needs to be calm, private, and comfortable. Turning our cell phone off (or atleast put on silent), closing email inboxes, and explain to the family that we cannot be interrupted. Make ourselves comfortable, relax. Buy a nice office chair and comfortable table. We need to be “in the zone”.

Many of us enjoy the ability to work from home, but it must be treated with respect. If we can have a few uninterrupted hours/make great trades and earn a living, then have the rest of evening to devote to the family (am not sure what to say to folks who trade equities and commodities in a single day – work/life balance is the biggest factor in determining happiness in any profession)

3. Education – It is interesting how many traders believe they can make 50 lacs/year after one year of looking at charts and reading books. Why would one think that trading requires less education than a lawyer or a doctor? These professionals spend years, learning their trade. A successful trader should expect to spend years as well.

Education is not free. Most successful traders blow out their account at least once or twice before they went on to make money. It might help to think of this as tuition, instead of as losing money. Education is expensive in other ways as well, not just financially but also mentally, emotionally, and time consuming (a typical professional degree takes 4 years). We have to devote ourselves to it in the same way a professional athlete would do before running a marathon. They don’t just wake up one morning and grab something at a restaurant to eat before they run the marathon. No – they train for months to condition their bodies, have strict diets, follow rigorous training day-in/day-out.

We need to condition ourselves for trading, and to do that we have to educate ourselves. Books, videos, classes, the Internet, and probably most important – ‘firsthand experience’ which takes us to the next point.

4. Experience – Education is important, but experience is key. Why do employers prefer candidates with not only college degrees but also on the job experience? Simple – experience is the most powerful way to learn/hone our skills. Putting what we’ve learned into practice is not easy. The experience of actually trading, not just reading about it, is what will really motivate us to learn and be successful.

We can read about support and resistance, or read about taking the emotion out of trading. But until we experience a trade that stops on some value because of support/resistance, and furthermore, it stops us out of a trade that we were confident would be a winner, then we really can’t fully understand the importance of what we read about (support/resistance and emotions). Best analogy I can think of – reading 100’s of books about swimming and dreaming to be a great swimmer. Unless we jump into the pool, real swimming can never be learned.

With experience comes wisdom, and wisdom is required to properly assess our trading. I think most successful traders had that “ah-ha!” moment when they realized that they were the problem (ie: look ourselves in the mirror, the problem is that we are not following our own rules). We cannot have that epiphany if we lack the experience and wisdom to be a proper judge, even of ourselves. Very important point to remember.

Everyone will recommend that new traders do ‘demo-trading’ until they are profitable. But they also realize that 1) they didn’t follow this rule themselves, and 2) even if they had, they would not have learned the same lessons until they traded and lost ‘real’ money. Demo trading is great (am not striking that down), but it is more like being on the outside looking in. It is not until we’ve placed real trades and lost enough money to be “painful” that we will start to change our ways, our rules, ourselves. That is because we are gaining experience by learning from the past.

5. Tools of the trade – The proper tools are essential for making money in any profession. Tools can range from our computer, our software, our internet connection and backup facilities. We need to probe our tools for weaknesses and if it is displaying a major flaw, correct it. For instance, don’t trade if the Internet connection is unreliable. We need to correct that. Don’t trade if our computer is too slow and our charts freeze during heavy market volume. Don’t trade if the broker terminal freezes during busy market hours (seems to be a popular topic among traders nowadays)

Indicators are also tools and many traders have way, way too many indicators on their charts. Some traders have none, trading strictly based on price action. If our chart has too many indicators, we will get conflicting signals. I suggest starting with a clean chart, and then adding only the absolute essential tools/indicators(if one trades based on indicators) to it. Too many of them can lead to ‘paralysis of analysis’.

Also want to emphasize the importance of picking the right broker (w.r.t cost) and data feed, not to mention charting and execution platform. Official data feeds are not expensive nowadays and am sure we would not let our head go into a MRI machine if we know the lab is using unauthorized MRI machine to image our skull. All these things matter in the long run!!

To end this post, take what I have said to heart. Trading is not for everyone – so if we are having trouble accommodating the above-mentioned information, then we might want to consider another profession. It would almost certainly be a lot easier on ourselves, our family, and our bank account. However, for those of us who push onward and conquer our demons, the benefits of being a successful trader are endless. It is, after all, the near-perfect job – in my opinion.

Force ourselves to realize there is no Holy Grail. The way to make money in trading is not by having the perfect indicator or automated strategy or the perfect Amibroker AFL. No, no, no – the way to make money in trading lies within our ability to understand ourselves and become an expert in the market we are trading. There are no short cuts.

Happy trading !!

Why do we exit prematurely from a trade

Impatience

I had the privilege of meeting so many traders last weekend in a trader’s conference in Lavasa, Pune. It was an excellent eye-opener for me with respect to the struggle a budding trader goes through. Different traders had different issues and wanted to talk about a common issue among traders in this post.

Many traders have the issue of closing trades too soon. Especially, as it gets closer to their intended target (or trail too close if they dont have targets). Once the stock/future reaches certain level, they seem to trail the stop much closer only to have the market take them out and then reverse to their target (or taking its original path). This seems to happen over and over (in varied intervals). They are afraid to give money back to the markets and have seen traders going for counselling for this behavior in western countries. We all understand this is a problem but a little background will help us see it more clearly.

Analysis of the problem:

This is a classic example of ‘prospect theory’ which states that people are willing to settle for a reasonable level of gains (even if they have a reasonable chance of earning more), and are willing to engage in risk-seeking behaviors where they can limit their losses. In other words, losses are weighted more heavily than an equivalent amount of gains. An employee thinks this way every time he/she looks at the paycheck and sees how much money has been deducted for taxes. He/she doesn’t want to work anymore, and earn more money, because he/she does not want to pay more taxes. Although the employee would benefit financially from the additional after-tax income, prospect theory suggests that the benefit (or utility gained) from the extra money is not enough to overcome the feelings of loss incurred by paying taxes.

Cleansing thought:

Many traders wonder why consistently being profitable in stock markets is always elusive. The above mentioned problem is one of the main reasons that inhibits consistent profitability in trading. ‘Learning what to do, and actually doing what we learned (under pressure) are two different things’. And once again,it goes back to one’s desire to maximize the chance of gain, not to maximize the gain itself.Getting out of winning trades prematurely, is an obvious manifestation of this phenomena. This is also why most of the traders inherently look for ‘high winning rate’ system.

All it serves to do however, is make one feel better at that moment in time. In reality, it is to the severe detriment of our long-term performance. One has to realize that trading is a big-picture endeavor, and what feels good in the short term, is most likely counter-productive in the long term. Quite simply, leaving a large amount of money on the table, or worse yet; missing a major winning trade, is just as bad, if not worse, than a losing trade. The market however, lulls us into complacency, and even reinforces this natural behavior, because it spends more time in ranges than in trends, where small profits quickly vanish. We then learn to instinctively cover trades before they return to our entry point, or turn into losers as we would have seen this behavior many times selectively.

What makes matters worse, is that that our exits command top priority in the trade decision hierarchy (for obvious reasons), followed by trade size, and entry point. Liquidations (exits) are far more important than initiations, and harder to get right. When we enter a trade, it is the most hopeful point in the trade cycle, but come exit time, a trader is bombarded with stress, cognitive load, emotions and bias and they all have reared their ugly heads, just in time to distort our expected value of the trade.

Having a predetermined target and sticking to it is not the answer, in my opinion. If we have specific target based exits and if it works for us, that’s great. In most cases, people are going to get out early anyway, and it is tantamount to trying to predict the market. It is more important to concentrate on projecting losses, risk management, and finding signals that produce trades that are well defined, have a proven edge, and are reproducible, rather than trying to out-guess the market.

Essentially, if price action or our expectation dictates the market should continue in our favor, why get out? And, why use a target that we’re not going to follow as our exit point? Exit the trade when price action/indicator signal tells us the trade is not good anymore.

Parting thought on this topic:

Imagine that trade management is like grilling a steak. If we like our steak well-done, we are not going to take it off the grill after 4 minutes, because we’re hungry and can’t wait for it to fully cook. And we’re not going to take it off the grill at some arbitrary time, because some cookbook said a well-done 2-inch steak should be cooked for 10 minutes. Instead, we are going to observe the steak, maybe poke it with our finger, or cut it open a little to see if it’s done. And only when it is cooked to perfection, do we take it off the grill. This applies to EVERY steak we cook. Same applies to every trade we take in the markets.

Thanks for reading and happy trading !!

Overcoming the fear of pulling the trigger

There’s a saying that’s been used in pool halls and poker rooms – if you gonna sweat it, then don’t bet it. Don’t get me wrong here. it’s good to be a little nervous because it keeps things exciting and in perspective but if we see our setups working again and again in a consistent manner and we don’t put on a trade – that’s like having the “the upper hand” in anything that involves winning and we are not betting. It’s like having the best batsmen in our team and no wicket-keeper behind us, it’s like spotting Tiger Woods a 10 stoke lead, and it’s like getting a Royal Flush (in poker) when the pot is maxed out.

Bottomline – we just got to do it. But, as we know already, it is easier said than done unless we know and address the root causes. This is commonly called as ‘fear of pulling the trigger’ in trading arena.

Before doling out solutions, we need to understand the psychological aspects behind this fear.

Reasons behind this psychological fear

1. Fear of loss – We can break this fear down into two distinct psychological characteristics:

A. Lack of confidence – encompasses all things associated with a trade (the whole nine yards) Starting from analysis, methodology for trade selection (mechanics) execution and a plan to handle exogenous events.

B. Lack of discipline – includes all of the above but with direct focus on self, and our ability to react, either in accordance with a specific set of “rules”, or to unexpected, unanticipated scenarios.

2. Fear of winning – this fear may sound funny but this is very much true as any other fear involved in trading. This fear can be broken down into a plethora of psychological characteristics, all of which can be clumped into a single fear – fear of change.

Fear of change involves all aspects of our life at this moment –

a. Winning will make us more desirable financially and-or personally (aspect of relationships),

b. We believe we are not entitled to win (aspect of self-image),

c. A successful career means more responsibility (aspect of personal growth).

The possibilities of why we would fear change are nearly endless. However, the reasons are completely unique to us. There is no trading specific material for this. Self-help books and reading material might help a bit.

3. Urge to make money faster – this urge can make us not want to lose in any trade. As losing equates to lesser capital than where we started. This urge can also stem from the fact that our livelihood depends on the money we make from trading

4. Mechanical vs Discretionary system – If we are a discretionary trader, we’re probably suffering from a condition that golfers suffer from time to time: the yipps. The yipps is a putting condition where one get so anxious over where the ball is going to go that we get janked up before we hit it. It’s typically a fear of blowing it past the hole. In other words, fretting about the result even before we hit the ball. Usually a golf instructor would say – swing smoothly and keep your head down. A discretionary trader goes through ‘yipps’ more than a mechanical trader. Mechanical traders face some other demon – second-guessing the system. If our system is mechanical, yipps will not exist that much.

Possible solutions to these conditions

1. Back testing would obviously give us confidence to pull the trigger but what would help us when we face a losing streak? That’s where reduced leverage (to start with) would help us. Start out with 1 lot, follow the system to the dot. It is really important because it creates that ‘discipline’ brain muscle in us. And, slowly and gradually move up in size. Remember, we are all in this profession for the long haul – no hurry. But, if a trader is in pressure to make money right away (and big), market will show us the road to adversity.

2. Trading for monthly expenses – Most of the newbie traders have the strong urge to make money (who doesn’t) but this can act very counter-productive to our efforts. Do not trade for monthly expenses – we can start withdrawing money for our expenses in the later stage but not when we have issues in pulling the trigger. So, having backup money (to cover expenses for 3-4 years) while trading initially is imperative.

3. Little tuning to our mindset will also go a long way in our favor. Whenever we have a setup, the first thing we can start telling to ourselves is that “this is going to be a losing trade and I am going to get stopped out on this” . We EXPECT to lose on this trade but we don’t HOPE to. There is a difference between expecting and hoping. We HOPE to win on this trade but we don’t expect to. When we lose, we are ok as we expect and prepare for it. When we do win, we give a pat on our shoulder since we expected to lose. Tomorrow we will start all over again – again expect to lose but hope to win.

Good luck and happy trading !!