Traders undergo specific psychological processes throughout every day’s course of trading. A watched stock will rarely move in the desired direction quickly and deliberately enough to assuage the agitated emotional state of a fearful trader. When the stocks fails to immediately and pointedly move in the predicted direction, the trader finds himself filled with the most dangerous of negative feelings: doubt.
Day traders also experience a psychological roller-coaster ride when staring at a screen to discern a profitable entry. Successful traders will calmly and patiently wait until certain that the chances for success are substantially better than a mere pull of a lever. In this situation, as in the one before, the presence of paralyzing doubt in the traders mind is the main obstacle to long-term success.
Ultimately, it is patience alone that separates the weak from strong, the patience to sit quietly in wait for the perfect opportunity, and the key to patience lies in monitoring one’s inner dialogue. All humans, conscious of it or not, experience an internal dialogue. Sometimes this dialogue helps the individual complete a certain task at hand, like when the driver of an automobile slows down and signals before making a left turn across oncoming traffic, but internal dialogue can also serve the purpose of soothing the individual and helping them remain calm and alert. This dialogue allows the individual to remind themselves, sometimes completely subconsciously, that they have made left-hand turns across oncoming traffic countless hundreds of times in their life, and that things will be as fine this time as they were every time in the past.
The patience exhibited by the smart driver cutting across oncoming traffic is precisely the type of patience exercised by the successful trader. With dozens of cars whizzing by, the patient driver’s eyes slide up the road towards the horizon, and he observes the point that will most likely be safe to cross. When that time arrives, and that slight gap in traffic emerges, he must act immediately and cannot hesitate without risk of collision.
It is the same for the day trader. If the trader looks up the road for a gap in traffic, or a proper entry point to make his trade, and decides upon a certain point, he must not deviate from this decision without planning the entire trade anew. If he decides, based on a rational trading plan, to buy at fifty five and sell at fifty seven, he has no business entering or exiting at any other point without a well thought out, logical reason.
Patience is a virtue, and no place does this truism hold more water than the stock market. When a trader allows doubt, a facet of fear, to inform his trading decision, he sets himself up for failure. The market does not care about the wants of an individual trader, whereas when making a turn across oncoming traffic, a mistake may result only in an oncoming driver slamming on his or her brakes in order to avoid an accident. The market will not extend such a courtesy. It will run over anyone and anything between it and where it is going without as much as an afterthought. It is the responsibility, not of the market to go where the trader wants it to go, but for the trader to determine the most likely course of the market and plan accordingly. Patience, achieved by a trader monitoring his internal dialogue, makes it possible.
“No decisions based on FEAR”