By Sam Evans, Co-Founder and CEO

I recently held a Wellness Water Cooler session with our students. The main subject was on the consistency of mindset. I asked our students ‘to ask themselves this question, ‘How rules-based is your trading’? Luckily, due to our teachings, many of them said they were following their rules. That they were being consistent.

So I ask you, ‘how rules-based is your trading’? You see, many of us struggle to keep rules-based 100% of the time. That’s because we let our emotions take over. We let our experiences and our beliefs take over. 

Our beliefs drive our actions

Many times we deviate from our plan because we let our emotions get in the way. Our beliefs about what is or what isn’t going to happen. Our beliefs shaped by what we thought happened in the past… and I say thought because unless we journaled we really don’t know what truly happened.

Let’s not forget our beliefs around other items such as losing money, or always having to win. I have seen many a skilled trader come unstuck because they have to have a winning day. 

The problem is that our beliefs shape our actions and our actions lead to our results. Often times we sabotage our trading without even realizing why. Do we even know what we believe or don’t believe to be true? I know this is some deep stuff but it’s amazing what drives our action. 

Changing our beliefs

We say that emotion has no place in trading and stick to your rules but in reality, we have to master our emotions. After all we are humans and it’s hard to be completely emotionless. To really get consistent we need to keep our emotions in check and work to change our beliefs. 

To change your beliefs you have to understand what your beliefs are and then work to change them. Simple? Ok, not so simple but keeping a journal is the key to consistency. 

Keeping a journal 

When you start to record your trading. When you start to journal what you do, day in, day out, you will see growth. Why? Because you will see where you are and aren’t sticking to your strategy. When you start tracking you’ll really have solid data to start changing your belief patterns. You’ll see that when you follow your rules-based strategy (if you have a good strategy with solid trading rules) you’re more consistent. 

Now, if you’re sticking to your rules and you aren’t being consistent then you know for sure that your strategy isn’t working for you. The difference from before is that you will know. You will know what is and isn’t working. You have hard data to show where the issue lies. 

Basing your actions on your rules

If you are following your rules and they are working then your beliefs will start to change. You will start to believe in your system and that will change your actions. You will start to follow your rules, more and more. Guess what? That will lead to a different set of results, embedding your new belief system. 

Putting it into practice

To help my students with this I bought up the following chart. 

We talked about a trade that started to work and then retraced. Now for some people, this could make them nervous, make them move their stop or cash in before they get to their target. What you have to do though is base what you are going to do on what you know to be true, not what you believe to be true… until the two are the same! 

If you know based on your journaling that the trade could stop you out but that the majority of the time it does hit your target, what are you going to do? You are going to leave the trade alone. You are going to give it room to breathe. Walk away if you have to, but go off of your journal, your statistics, your results, not off of your emotions. Follow your rules-based strategy!

By consistently journaling you are going to start getting less phased by retracements. You are going to change your belief system. Your actions are going to change and then so are your results. 

Consistent mindset = consistent trading

You are never going to become consistent in your trading if you are not consistent in your actions. If you aren’t following your rules, you cannot possibly know if they work or not. You may realize that you are always moving your stop to break even because you are worried about losing. What if it turns out that more often than not when you don’t move your stop to break even and trade plays out you hit your targets? Rather than making a little, you make more by letting your trades just be. 

Having beliefs backed up by real data will give you the consistent mindset needed to stick to your rules and become a consistent trader. A rules-based trader. So what do you say? All that really matters with trading is what you are doing right now, going forward. It doesn’t matter what happened yesterday, or the day before. Start journaling, start changing your beliefs and basing them on what is true, and start changing your actions. 

If you want to learn more, head over to our website and watch StartUp Lesson 7: Sharpening Your Mental Edge. It really is key to becoming the trader you have always wanted to be. It’s also one of the reasons we hold monthly Wellness Water Cooler sessions for our students. Trading is more than just an effective strategy.

Until next time, be well, 

Sam Evans

[email protected]