Trading is Mental Warfare
10 mindset hacks to help you conquer poor trading psychology & unlock better consistency.
Today at a glance:
10 mental models to improve your trading psychology
A journalling/post trade analysis software to use
And more! Let’s dive in:
It’s no secret that the best traders are the ones who have achieved a level of mental stability that other market participants will never understand.
I’ve been so obsessed with figuring out what it takes to reach this level, and as a result have come up with the 10 most impactful mental models that you need to know (and won’t succeed without):
1. The “Uncertainty” Principle by Mark Douglas
The sooner you realize there are no certain outcomes in the market, the better.
“The best traders have evolved to the point where they believe, without a doubt or internal conflict, that anything can happen.” - Mark Douglas
Accepting the “Uncertainty” Principle allows you to do the following:
1. Overcome fear/overconfidence
2. Interpret the market’s action without bias
3. Stay focused in the ‘now moment’
4. Reach the flow state
Accept uncertainty & you’re already ahead of 90% of traders.
2. The Pareto Principle
The Pareto Principle states that over many outcomes, roughly 80% of the results come from 20% of the causes.
In trading, this means that 80% of your returns will come from 20% of the stocks you trade.
Why is this important? There are many interpretations, but my favorite is this:
By understanding 80% of your returns come from 20% of your trades, you can take an unemotional look at your losses. There is no need to get attached to any one loss because chances are it won’t matter in the long run.
And, if you’ve been looking for a tool to help you master your post trade analysis, I highly recommend checking out TraderSync. They’ve been my go to for years now, and help me track my performance on a consistent basis. Sign up for a free, 7-day trial here:
3. Probabilistic Mindset inspired by Mark Douglas
The market is nothing but a probabilities game. A winning strategy, or edge, is nothing more than a higher probability that one outcome will happen over another.
Adopting a probabilistic mindset towards the market acts a lot like the Uncertainty Principle.
You are able to detach yourself from the outcome of each trade, knowing that the next trade has nothing to do with the previous. It’s all a game of probabilities.
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