​Constructing a winner’s mentality: Seven principles of trading psychology

Success and failure in the trading market are often not just technical or strategic issues. More often, mentality is the decisive factor. According to the theory of Mark Douglas, a futures trader of Merrill Lynch who has studied trading psychology for 17 years, many traders’ failures can be attributed to three “loser mentality”: overconfidence, self-destructive beliefs and fear. How do these mentalities affect transactions? How can it be transformed into a “winner mentality”? This article will be discussed in depth!

Overconfidence trap

Overconfidence is a common mentality in trading, which makes traders overestimate their abilities and market control. This mentality drives traders to conduct high-risk operations, such as full position trading, blind leverage, and ignoring the importance of stop loss. However, the market is unpredictable, and overconfidence often leads to serious capital losses.

Beliefs of Self-Stirring

The belief in self-destruction refers to the mentality of not wanting to succeed deep down. This mentality may cause traders to be careless at critical moments, or make mistakes when executing transactions, such as making a sell operation mistakenly into buying. This self-destructive behavior is actually a fear of success.

The influence of fear

Fear is one of the biggest enemies in the transaction. Fear makes people escape and are unwilling to face market information that may cause losses. Worse, fear may also lead to traders subconsciouslydistort market information, misread unfavorable signals as favorable, and thus make wrong trading decisions.

The root of these three loser mentality lies in cognitive deviation, that is, the trader’s cognition does not match the market reality. This deviation may be due to lack of experience, wrong market understanding, or sentiment.

How to build a winner mentality

To solve these problems, Douglas believes that the key is to establish a “winner mentality.” Here are some ways to build a winner’s mindset:

1. Objective self-assessment: Regularly evaluate your trading performance and mentality, and face your weaknesses and mistakes honestly.

2. Risk Management: Always put risk management first and do not ignore potential risks due to excessive confidence.

3. Emotional Control: Learn to control emotions and prevent fear or greed from controlling trading decisions.

4. Continuous Learning: The market is constantly changing, and new knowledge and skills are continuously learned to adapt to changes in the market.

5. Positive mentality: Cultivate a positive mentality and believe that you can succeed, but also accept that failure is part of the road to success.

6. Discipline: formulate a trading plan and strictly abide by it, so as not to allow emotions to interfere with execution.

7. Reflection and adjustment: After each transaction, no matter whether it is profit or loss, you must reflect on it and learn and adjust the strategies.

We call these seven methods “the seven principles of long-term profit”, and they form the cornerstone of successful trading psychology. These principles not only provide theoretical guidance, but also require continuous practice in actual transactions. Incorporating these principles into every trading decision helps us develop a ‘winner mentality’. Remember that changing your mindset requires time and patience, but as long as we persevere, we will eventually achieve long-term and stable profits. At the same time, EagleTrader also sincerely hopes that our candidates can use these principles as guidance and strive to improve their trading capabilities.