To strengthen the mind [Exchange Demon]
Have you readers ever heard the term "the 3 M's" that are crucial in trading? This concept became famous from Alexander Elder's renowned book The New Trading for a Living (Panrolling publishing) and represents Mind (psychology/mental), Method (strategy/technique), and Money (money management). All three are indispensable elements in trading, and if even one of the three M's is missing, it is almost impossible to win consistently in the long run.
For example, no matter how excellent a trading method is, if money management is sloppy, you will eventually fail; and if your mental state is weak and you cannot adhere to your trading rules, even a superb method is meaningless. Conversely, even with superb money management and mental strength, if your trading method lacks edge (statistical advantage), you cannot sustain profits. In this article, I would like to share my views on Mind (psychology/mental).
Table of Contents
1. Why do results differ for the same method among individuals
2. What is the mental aspect of trading
3. What causes an inability to cut losses
4. Why does profit and loss become imbalanced
5. How can the mental state be strengthened
6. Prioritize correct decisions over winning
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※This article is a revised version of an article from FX攻略.com February 2014 issue
Why do results differ for the same method among individuals
Readers who read this magazine with the diligence to earn profits from trading surely work hard every day. Much of that effort is likely devoted to what is called "technical analysis"—testing and refining buying and selling logic while watching charts.
Of course, if this leads to sustained profits, that is wonderful. However, many people struggle daily when things don’t go well.
In my work, I have had opportunities to meet thousands of FX traders. I have often found that the primary reason for not achieving long-term success is not the trading method or money management, but the investor's mental state.
The ability in trading methods and money management tends to improve proportionally with accumulated trading experience. However, mental aspects cannot be strengthened merely by accumulating trading experience. Therefore, even when trading the same buying and selling logic, one trader wins while another loses, a phenomenon that may seem strange. This occurs precisely because the mental strength of each trader varies greatly.
