The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

5.10. CHAPTER IN REVIEW

1. The key to trading success is to promise or commit to a stretch target over a specified time horizon and then construct a strategy to reach this target. As easy as this may sound, it is not particularly easy to implement, especially in turbulent times when traders are feeling very stressed and pulled out of their game.

2. Your capacity to cope effectively is significantly reduced by the overreaction of your nervous system. If you don't recognize what is happening and attempt to deal with your stress responses, you are likely to become overwhelmed.

3. Therefore, to manage anxiety and fear while dealing with the uncertainty of the market, you must become comfortable with uncomfortable feelings. You have to notice and separate your emotional responses from the decisions that you are making.

4. When a trader reacts to his emotions, he often tricks himself into believing false notions about himself and his abilities—either overvaluing his abilities or undervaluing his potential. A trader who is able to observe his own emotions, without reacting to them, has to have both self-discipline and good self-esteem.

5. An individual with good self-esteem will rebound from failure, often seeing a missed shot or a blown trade simply as a challenge to win at the next opportunity. In order to be willing to risk—in order to be willing to be wrong on occasion, to make a mistake, to look badly—an individual's self-esteem must be sufficient to allow this.

6. The ability to self-assess after periods ...