So What Is “Proper Trading” Anyway?

Always be one step ahead of Risk

“When an idea exclusively occupies the mind, it is transformed into an actual physical or mental state.”

— Swami Vivekananda


Proper trading is all about having the proper mindset.  Whether you’re “investing” long term or trading intraday tick charts, the principle is the same.  In much the same way samurai warriors defeated opponents before ever setting foot on the battlefield, so too do traders “win” long before entering a position.  How so?  Consistently profitable traders have several mental characteristics that less skillful (profitable) traders lack.

  • Think risk first and profit second — Profitable traders view every potential and actual trade through the lens of risk or whether they are willing to truly accept the potential damage to their account as opposed to focusing on the potential reward of trades.

  • Accept risk — Profitable traders truly accept the associated risks once they decide the potential reward is worth it.  These traders understand that in order to win consistently they MUST experience controlled losses.  They know that if they minimize losses and exercise patience with winners, they can reap incredible profits.

  • Think more/Trade less —  Profitable traders know that their profit on every trade lay in the short distance between their ears.  They understand that the siren song of securities is an invitation to trouble much of the time.  They spend more time assessing a security’s overall chart structure and identifying optimal transaction points rather than focusing on the physical activity of clicking an entry or exit.

  • Stalkers — Profitable traders are disciplined and patient.  They will pass up a good entry to wait for a great one.

  • Decisive — Profitable traders make decisions.  They know that as long as their decisions are framed properly (i.e. from a risk perspective), their first thought is generally the right one…

  • Forgetful — Profitable traders have short memories.  As we were told many years ago on a Wall Street trading desk, “If you have a losing trade, forget it quickly… the chance to profit is coming up.  If you have a winning trade, forget it even more quickly… the chance to give up those profits is coming up… stay in the moment.”

  • Group think — Profitable traders care little for any one trade.  They know they have already taken steps to minimize the impact of any single trade.  Instead they focus on groups of trades as groups are more indicative of their process… which is what’s really important.

There are more distinctions, but you’re sensing the theme yes?  Proper trading is about your mental approach… no more, no less.  Whether you are managing your 401K positions, swing trading or day trading for short-term profit, do yourself a favor and spend as much time on your mental game as you do learning fancy methods… your account will thank you.