Introduction
What makes an F1 racing champion? Is it the car? Is it the technology that was used in the construction of the engines? No, it’s the driver. Driver confidence in corners and patience in the face of daunting challenges from other drivers make a champion. Similarly, it is the trader who makes the difference in trading stocks and options. It is the confidence of stock or option traders in their chosen methodology and their patience in the face of overwhelming price changes that makes a stock or option trader a champion.
Trading confidence and trading discipline are the most important aspects of trading psychology that make stock or option traders millionaires. They are also the main reason why so many stock and option traders fail and ruin their bank.
trust trade
Trading trust is a mind trust bank account in every trader and trading discipline determines whether you deposit or withdraw from it. Trading confidence is what allows all stock and option traders to execute trades according to their chosen methodology with confidence and stay in the game despite losses knowing that they will eventually make more profit than loss. Trading trust is a bank account that you can deposit or withdraw into. Every time you lose money you withdraw from your trading trust and every time you make money you deposit into your trading trust. When your trading confidence is zero or broke, you will find yourself hesitating before every trade while imagining the pain if the trade loses again. You will have sleepless nights and run out of trades at the first sign of danger, leading to unnecessary losses. When that happens, it’s time to get back on paper and reexamine the way you’ve been operating. In fact, you don’t have to break your trading account balance for your trading trust to go bankrupt and a failing trading trust always leads to a failing trading account. On the contrary, whenever you make money with your chosen methodology, you deposit into your trusted trading bank, you feel safe and happy when trading, and you don’t panic when trades go wrong.
Factors Affecting Business Confidence
An important determinant of your level of trading confidence is the amount and nature of the money you have to trade with. The more money you can afford to lose, the higher your initial level of trading confidence will be. Stock and option traders who can afford to lose very little money will generally have a very low level of trading confidence, as each loss takes a significant bite out of their trading trust bank. Again, you don’t need to lose all your money to lose all your business confidence. Some stock and option traders no longer feel confident enough to trade when their account is down 30%, while others reach that level of confidence only when their account is down 70%. The nature of the money you have to trade with also determines your initial trading confidence. If you are trading with excess money that you do not need, then your trading confidence level would be very high. In fact, your trading confidence could still be high even if you lose all that money. Conversely, if you are trading borrowed money that you must repay in installments and with interest, your trading confidence would be extremely low as each loss makes it more difficult for you to repay.
Unfortunately, there is no objective, empirical method for calculating your trading confidence level and most stock and option traders only understand it when you go bankrupt.
At this point it is clear that you need to make money to build a solid trading trust bank account and to make money you need to follow a proven and successful trading methodology. A losing method will bankrupt your trading confidence in no time, no matter how much you start with.
commercial discipline
Once you’re sure you have a proven and successful method, you’ll need Trading Discipline to ensure you stick to the rules and only trade when all entry requirements are met. Without trading discipline, you will end up spoiling any successful methodology, leading to the loss of your trading confidence.
Trading discipline consists of patience and a calm, objective mind.
Each trading methodology operates only when specific settings or rules are met. Without trading discipline you will not have the patience to wait for such settings or rules to be fully adhered to before trading and each time you break the rules you increase your odds of losing and each loss will be taken away from your trading confidence. Therefore, do not make “fun” or “experimental” trades by compromising the rules, as losing in such conditions also takes away trading confidence.
Trust and Compassion Trading
A distinction must be made here regarding business confidence and complacency. The complacency comes not from high trading confidence, but from a complete lack of trading discipline. Complacency always leads to a quick and complete breakdown of business confidence, so make sure you understand the difference.
Trading Psychology – Conclusion
Finally, the relationship between trading confidence and trading discipline actually goes both ways. Strong trading discipline following a proven methodology builds strong trading confidence, and strong trading confidence also fosters the development of strong trading discipline as you experience the success that comes from following the rules. The Star Trading System is one such system. Only when you have solid trading confidence and trading discipline will you have the trading psychology needed to make millions.