It has been mentioned in many posts here and elsewhere: to be successful in trading, you need a completely different mindset than the average person.
The Normal Mindset: Expecting Certainty
In our everyday lives and jobs, we usually think in terms of certainty. Our brains like to figure out why a choice we make is the right one, and we generally expect it to work out.
- When things don't work out as planned, we feel like we've failed.
- This failure feels terrible for our ego because we put effort and intelligence into the decision. When that effort only leads to a loss, it's hard to accept.
The Trading Mindset: Thinking in Probabilities
Now, imagine a simple, boring game where you and an opponent take turns rolling a die to get the highest number. How would you feel if you lost or won? You'd probably feel neutral about it. Why?
- We accept that the roll of the die is random, and we have no control over the result.
- We didn't put any personal pride or prestige into rolling the die, so our ego isn't hurt when we lose.
- We know there's only a 1 in 6 chance of getting any specific number, so we easily expect to lose some games right from the start.
A successful trader needs to look at their trading activities the same way: by applying probability thinking instead of expecting certainty. Trading, like the dice game, is about accepting risk and understanding that a good decision won't always lead to a winning outcome.
This is how a trader should view his trading activities by applying probability thinking instead of certainty thinking.