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Trading Psychology Posted by Team Topstep January 12, 2023

Healthy Steps To Transform Your Trading


By: FairValueTrader

The part of me constantly striving to better myself sees the new year as good of a time as any to continue my journey toward self-improvement.

This article will discuss the trader’s mindset going into the new year. With regard to our trading, whether hobby or vocation, we are always working to improve. No matter how well we did in the previous year, if we reach a plateau thinking we have no more improvements to make, we are at risk of fulfilling the saying that “contentment leads to failure.” Alternatively, if we underperformed, there is no time like the present to prepare for our best days ahead. 

We know people resolve at this time of year to make various life changes. Some are determined to relax and enjoy life more frequently, while others plan to live more disciplined and cautiously. Your trading resolution will depend on how the previous year went and what strengths and growing edges you can detect in your trading personality and results.

This article is inspired by a long-time friend who has given enough attention to his craft to become a marginally decent trader. Basically, he treats trading as a hobby and usually breaks even at year’s end. However, he determined in 2023 he would take the next step by adjusting his personal discipline, so that’s what we will focus on here.

It might be expected that, as traders, we would first examine systems, statements, and charts as factors in determining our New Year resolutions. However, I’m convinced that it’s better to approach our goals holistically. You’ll see!

Mental Health

Without being mentally healthy, we can hardly expect to be successful at most anything. We may produce fair results, but they are only possible to enjoy with a clear and balanced mind. Therefore, it’s essential to take care of our minds in addition to our account balances. 

This works differently for each trader. However, one commonality we all have is education—not necessarily in the formal respect, but in the way we stretch our minds, allowing ourselves to grow and pushing ourselves to think, explore, and generate new ideas. Without continued education, our brains can become stagnant. To trade effectively, we need healthy, active, and energetic minds.

So what can you do to improve your mental health? This will depend on what connects with you. Some traders may find it practical to utilize a series of meditations to help clear the clutter and intellectual toxins from the brain. For others, it may help to read more, including some serious topics such as politics and economics, balanced with lighter subjects like sports, biographies, or gardening.

Regardless of what works best for you, as part of your trading edge, don’t neglect your mental health. The brain is imperative to every function of life, including your trading, so any investment that you make into a healthy mind will be sure to benefit your trading. 

Physical Health

What good is earning profit from trading if a lack of physical health means you can’t enjoy it? First of all, I must recognize and be sensitive to the fact that not all of us can determine every facet of our physical health. Some are born with or develop hindrances to health that are unavoidable. However, for those who can take reasonable steps to safeguard their health, they have a great responsibility to manage their bodies with even greater priority than our trading accounts.

There’s another aspect I think we can all agree with—that mental health, physical health, and trading health all overlap. When we get used to following healthy practices, then we tend to be more beneficial in whatever we do. For example, a healthy body leads to healthy thinking, which helps with productive trading. 

Furthermore, as traders, we can build up incredible physical tension, and when we exercise, we release these toxins. This is why one trader I know plans to employ a yoga regimen this new year. Perhaps yoga may not be for all of us, but any of us can take steps to ensure better physical fitness. A good trader will do well to develop physical health habits, and there is no better time than the new year to incorporate these strategies into our lifestyle. 

Trading Health

Okay, this is the one you were all expecting. Several elements of trading health are worthy of exploration. But first, we should consider our habits and disciplines. I don’t believe any trader can maintain long-term stability without a refined set of rules to govern their trading behavior. 

To be your best, your rules must come under periodic scrutiny so you can detect how to better your situation and improve your methods. For some, this is risk-based. How do you manage risk? Do you risk too much with too little reward? If your risk habits tend to be problematic, then you will know what to target with your new year’s resolutions. Others may need to consider the timeframe they trade, knowing that they may outperform in some periods while underperforming in others. Do your rules factor this in? 

Some traders tend to overtrade, which most often leads to losses. Has your plan adapted to eliminate this behavior? These are just a few examples of disciplines to consider to improve your trading this new year.

Other matters are relevant to your trading methodology and systems. For example, you’ll know which markets gave you the best and worst opportunities in the past. And when you consider this, you’ll determine how to utilize your best markets in the new year. You can choose either to eliminate those underperforming instruments or, alternatively, to trade them better. Again, you’ll know which systems and indicators worked for you or not and how to maximize on your observations from the previous year, which will help determine your future goals. 

Relational Health

I intentionally saved this one for last as it is so relevant to trading. First, I can guarantee that you’ll trade better when you have stable relationships surrounding you. I can’t begin to tell you the many examples I’ve observed of good traders who turn into bad traders when going through the dissolution of a romantic relationship. A variety of relationships affect us in all sorts of ways, but maintaining healthy relationships will help your trading because they will create balanced interactions around you. 

Furthermore, as a market engineer, I’ve heard it said not to trade in a closet, meaning alone or in the dark. No matter who we are, we sometimes need a community around us to keep our minds stimulated and healthy (think back to earlier in this article). We need people who will “push back” when we break our trading rules and discipline, which we also addressed earlier in this publication. 

A trading community enables us to engage with others who know our trade and who can impart wisdom to us. At the same time, with a trading community, we can receive the satisfaction of helping others. 

Finally, when it comes to relationships, it’s good to have a supportive infrastructure around you. Maybe you’ve been trading but need an extra push to go to the next level. You’ve heard it said that it’s easier to make money when you have money. This is so true. Trading too small of an account creates limitations for traders. 

On the other hand, it is important to remember that more money means greater losses can accrue. However, to reach your goals, it may be time to go ahead and receive the benefits that trader funding can offer you. These advantages are not merely limited to monetary assets. While these alone offer you great incentives, a community of support and a structure of accountability around you can make a critical difference in finding and maintaining your 2023 goals and disciplines. 

This article is necessarily limited, and many considerations are not addressed here, including subcategories within the broader categories that this publication engages. Please feel free to discuss it with our trading community and even “push back” if necessary to what you read here. Let’s work together to make 2023 the best year yet. Until next time, trade well!