The business media and stock market pundits are constantly trying to anticipate what the market is going to do next. The indices are going to soar for these reasons or they are going to crash due to this or that issue. In reporting the daily battles over market direction, the media uses a very basic assumption - up is good and down is bad. That makes the coverage of what is happening much easier but it is a terrible approach from a tactical and strategic standpoint for traders.
Downside action is not inherently negative. In many situations it will be a big positive as it helps to create a new set of opportunities. Wishing and hoping that the market doesn't go down is a denial of reality and will not make you money. Maybe a one-way market is good for buy-and-hold investors that never make new buys but down markets are cause for celebration too.
The important issue is that overall market direction should not impact your mindset. Of course you aren't going to be happy when you lose money but it is far worse when you fail to see the opportunities that come from losses.
Good trading requires a positive mindset. If you don't think you can make money then you won't. Far too many traders trade scared and refuse to see the positives when the headlines are screaming about disasters. Trading is a risky venture and there is always the possibility of losing. When you let the fear of losing money drive your actions, you have a tendency to take gains too quickly and develop unwarranted hope in losing positions.
The natural inclination of people who lack confidence or optimism is to do the exact opposite of what good traders would do. They are too forgiving with stocks that don't work because we don't want to admit a mistake, which allows poor stock picks to tie up too much capital for too long. When they do have success, the inclination is to lock in profits quickly so they can declare victory and forget the failures that have been eating at them. Overall, they end up letting losses grow while cutting winners short.
If you are a confident trader, you realize that market weakness and losses are just part of the game. When you have that mindset you embrace the price action, act decisively and move on. When you have a winner, you embrace it and feel secure that it isn't going to suddenly blow up and disappear. With success you are more willing to take risks, and that will lead to more success.
Good trading always requires careful management of positions, but confident traders are decisive and always feel as if another good trade is just around the corner. They know they can make money in good markets and bad, and they know they will do well if they are patient and keep plugging away.
A big danger for traders is to fall into a downward spiral. Bad trades and lack of confidence feed on each other. When things aren't going well, you lose confidence, which results in poor decision-making and more bad trades. Soon you feel as if you can't do anything right, you trade less frequently, and you don't make any money.
Having a positive attitude about your trading requires effort. You need to make sure no other distractions in your life are affecting you, then cultivate the mindset that you are going to attack the market and make it work for you. Forget what the media are reporting about the market. The key is to know you are in control and success is guaranteed if you continue to work at it.
There's always something new to learn about trading, but if you don't have confidence and a positive mindset, it isn't going to help you very much. To be a winner you have to think like one.
https://realmoney.thestreet.com/investing/don-t-let-market-headlines-impact-your-trading-confidence-14947840
2019-05-04 14:00:00Z
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