Many traders are their own worst enemies. How is it that Trader A can use the same system as Trader B, but they both see different results?

The answer lies in their execution, which stems from their self-talk. Webster defines self-talk as “one’s constant internal conversation.” Whether you realize it or not, you’re always talking to yourself. And the conversation going on in your head often dictates your actions.

For example, if you’re frustrated because you just had two losses in a row, then your self-talk may go something like this: “I can’t believe this damn market took out my stop twice, and then moved in the direction of my trade by 5 points each time! Either this trading system is awful or the market is out to get me!” Chances are, the next time you go to trade, you’ll remember the conversation you had earlier with yourself and miss out on a trade that could make up for your losses and then some.

To make sure you are using appropriate self-talk, I want to tell you exactly what NOT to say. Following is a list of the top five things a day trader should never say (out loud or internally):

1. “Ah, who cares? It’s only a sim trade.”

You must treat every trade as if you have $1,000,000 on the line. If you trade differently with Monopoly money than you do with your cash account, your trading results will always be inconsistent. To make matters worse, you’ll even develop some horrible habits. Trading can be a great business, but only if you respect it and treat it as one.

2. “I just know this market is going up (or down).”

Have you ever “just known the market’s going up”?  Emotional biases like those are deadly to your trading confidence.  In fact, what typically happens when you become stubborn and focus on one side of the market?  For many, the market punishes their wild behavior.

3. “This market always stops me out.”

If you say it, it shall be so. If you focus on “how bad it is,” you’ll just get more of the same. You must first come to terms with the fact that losing is a part of trading. Sure, people have had winning streaks that have lasted weeks, but eventually we all lose. If you’re losing more than you’re winning, go back and find out if it’s system or execution error.

4. “I’m down $500 for the day. I have to go back and make it up.”

Trying to “dig yourself out of a hole”  can lead to revenge trading.  Sometimes the best trade is no trade.  And the best time to shut it down is typically when the market isn’t cooperating.  One of the worst things you can do is try to “force” the market.

5. “This trade setup doesn’t meet my rules, but I’ll take it because I’m bored. 

Boredom is one of the top killers of traders. If you take trades just to do something, you’ll surely end up sorry. Just keep this in mind: You don’t need to be in a long or short trade to be actively trading. Being “flat” is a position, and sometimes the best one. Never take a trade because you’re feeling unproductive. Get up and get a glass of water, do some push-ups, or take the dog out.

Have you ever had a time where you felt like you were in the flow of the market, executing every trade perfectly?  On the other hand, have you felt no matter how “hard you try”, you can’t seem to beat the market?

If you’ve had any experience day trading, you may have experienced both of these states of mind… In a state of flow, you feel in sync with the market.  You’re confident and making decisions based on “humble boldness”.  You’re not forcing trades or chasing the market… rather, you’re pinpointing your entries, letting your winners run, and cutting any losses quickly and efficiently.

In struggle, you feel at odds with the market.  It seems like no matter what you do, you can’t seem to win a trade.  You hesitate and miss the big winner, you get in too early and get stopped out by a tick… it’s just damn frustrating!

There are many exercises one can do daily to make sure they stay in the flow with the market.  For example, I’ll take 10-15 minutes prior to trading to prepare myself for the market open.  First, I’ll turn on some relaxing music, sit back, relax and envision myself trading effortlessly.  I look at myself from a third person point of view and see myself relaxed and confident, alert and ready to execute a trade.  I then see myself enter, beautifully manage, and then exit my trade.

Once I get through the first part of that exercise, I’ll see myself take a trade that gets stopped out almost immediately.  I’ll allow myself to feel what it would be like to “lose” a trade… I’ll focus on the feeling of great execution and immediately start looking for another opportunity.  The key hear is to practice “losing” and to feel ok about that.  One of the worst things you can do in trading is to get mad or emotional when you lose a trade.

Think like a casino… it’s all about the odds and probabilities.  The more confidence you have in your trading system, and the more you practice proper mental programming, the less the emotional stress of trading will play out in your business.

This guy is definitely in sync with flow…

A very common problem among traders is Revenge trading.  It’s when a trader continues to trade although he knows he should shut it down for the hour, day, or longer.

This almost always works like the snowball effect.  First, the trader loses a trade or two and starts thinking (consciously or sub consciously) that he is down and needs to make the money back.  Next, he starts to take more and more trades that often don’t fit his trading system’s trade criteria.  The more he trades, the more frustrated he gets.  Before he knows it, he’s lost 8 out of 8 trades and can’t find a reasons why he took the trades in the first place!

I’ve been here and I know how frustrating it can be.  In the past, there have been times where I was up 4 or 5 days in a row, then gave back half the weeks profits on a “revenge day”.

The only way to get past this is by continuously focusing and working on your discipline as a trader.  It’s not a sexy answer with a quick fix, but definitely takes time and effort.  The rewards are way worth the effort.  It’s such a great feeling to trade effortlessly- to be in the flow with the market and executing like a pro!  To get there, you only need two simple little things:

1.  A strategy that shows a potential “positive expectancy” – In other words, that you expect to make money over time.

2. Confidence in your ability to execute the strategy.

Remember, there is no holy-grail to trading other than the 6 inches between your ears.  Stop focusing on the latest and greatest hype and start paying attention to your thought patterns and trading plan.

An important part of your “mental game of trading” is the art of not caring.  For a lot of traders, the harder they try the worse their results. The reason is because trading goes against what comes natural for most people.  As children, we’re taught to run away from things that cause fear.   In trading, however, traders have to act boldly in the face of the unknown.

When you get in a trade, consider saying something like, “I entered this trade based on the rules of my strategy, and I know losing is a part of trading so I won’t worry about the outcome”.  The more someone tries to trade, the harder it becomes.

Trading should get to the point where it’s boring.  The absolute worst thing someone can do is cheer on their trade or “hope” for it to hit their target.  When that happens, the trader is no longer thinking objectivly and can miss important information being given to them by the market.  You have to be able to change your opinion in a fraction of a second and not let it have any affect on your ego.

So the next time you’re in a trade and you feel your blood pressure rise and your hands start to shake, just sit back and relax.  Take comfort in the fact that you’re following a strategy that you’ve tested and practiced trading.