Unsuccessful traders think in unconstructive ways. And the tougher things get, the more unconstructive their thinking gets. They burrow deeper into poor habits which are driven by thinking/focusing on the wrong thing.

Successful people and traders think differently. When the going gets tough, they think about different things than the unsuccessful trader. Great traders focus on things that get them back to following their trading plan quickly.

If you want to win, change how you think. It’s actually pretty quick and simple. Here’s how.

Most people who enter trading are constantly thinking things like:

• I’m going to be a great trader
• I’m going to be rich
• I’m going to kill it today
• I’m going to make $1000 today
• I’m not going to lose money today
  

This thinking is Focused on the “What.” While this type of thinking can help define a goal, it will mostly hurt you as a trader while you are actually trading. It’s totally unconstructive and keeps you focused on the wrong thing, instead of the right thing which is HOW to do it.

Eradicate WHAT thinking as much as possible.

Instead, try to think/focus more on “How” and “Why.”

For example, instead of thinking things like “I am going to kill it today,” think more along the lines of:

• I have worked hard on my trading plan, it works, so I always follow it.
  
  
• I do my pre-trade routine every day so I am in the best mind frame possible when I start trading.
  
  
• I talk through every trade I make, going through my checklist to make sure the trade aligns with my plan.
  
  
• I do all this because following my plan is important for success in trading and for my mental health. If I want to have time and money to enjoy life, this is what I need to do.
  
  
• The last few days I have been overeager to trade, jumping into trades too early. Today I will wait until the signal occurs, and then wait one extra second to make sure I am not jumping the gun. (An example of if you noticed a recurring mistake recently.)

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Exercise to Start Thinking Like a Successful Trader

I bombard myself with these types of HOW and WHY thoughts all day, constantly, any time I remember, about anything I want to get better at. Trading is a vicious game with a very low success rate. If you want to make money at this, you need to be in top form, putting in more work than others to get sharper and sharper in ever-changing conditions.

The WHAT thoughts are more likely to drive impulse and inflame existing bad habits. The HOW and WHY thoughts actually provide a path to what you want. They remedy problem areas and help avoid trading mistakes before they happen.

As you notice generic WHAT thoughts, throughout the day and during trading, try to switch as much as possible to HOW and WHY thinking. Constantly, and always.

Do it so much that it becomes your natural way of thinking. When you have WHAT thoughts (which do help define what we want or don’t want) put HOW and WHY thoughts right after them, always.

And if a goal or outcome is really important to you, focus on those HOW and WHY thoughts all the time. Propel yourself forward with them.

Sure, think about your end goal occasionally, but most people are so obsessed with thinking about results that there is no room to focus on how that will actually be accomplished. They feel like they are constantly working because their mind is always thinking about the goal/results, but they aren’t actually making steps toward that goal, they are just mentally spinning their wheels.

During a trade you may think “I’m going to make so much money on this trade!”

Is that a constructive thought? Is it a WHAT or HOW thought? Take a moment to answer. Learn to recognize productive and unproductive thoughts, so you can switch out unproductive ones for productive ones.

That is a WHAT thought.

To make sure you actually do trade well (according to your plan) if you hear yourself say something like that, immediately switch to HOW and WHY thinking which is something like “My plan says the size of the position, my exit point is X, and I can implement a trailing stop loss if Y happens. I will stick to this because over many trades my backtesting/experience has revealed this maximizes monthly returns.”

The former thought (about so much money) is not constructive. It will probably cause you to hold onto a trade longer than you are supposed to, may cause you to remove your stop loss or target, or take a larger position size than you are supposed to.

The latter thought is more productive; it is a guide for what to do.

Make HOW thinking your primary thought process for any high-pressure situation or goal. Do this by practicing it constantly throughout the day whenever you remember.

Practice it often and it will become second nature. You’ll be cooler under fire, and it will actually free up your mind to execute, as practiced, when the time comes. You’ve talked through what needs to be done, so when the time comes you’ll act on it with minimal mistakes.

You’ve probably heard “Don’t think about the money” and this is how you do that. It’s how pro golfers can stand over a put worth $5 million, or not crack at the poker table with huge money on the line, or how a trader can increase their position size without breaking a sweat. Your mind is trained to think about your routine and process, how to best execute, not the result.

How to Get Better At This Type of Thinking – Exercises

This type of thinking takes practice. Lots of it. We can’t just will our thoughts about results away. We need to practice pushing those obtrusive results/WHAT thoughts out, and learn to replace them with more constructive HOW and WHY thoughts. Eventually, we get to a calm point where we just execute our plan regardless of circumstance.

How do we practice this? Mindfullness. Every day, all day, becoming aware of our WHAT thoughts and adding HOW and WHY thoughts right after. Continually. I gently monitor my thinking throughout the day. When I notice a WHAT thought I try to add in the HOW and WHY.

I also like to use meditation. I find the meditation of Passing Thoughts quite useful. Relax and try to clear the mind. We can’t really… thoughts just keep floating through. And you let them, float through. The idea is not to get attached to them, and just move the focus back to a clear mind. At times you will notice you drifted off in thought. When you notice, just bring yourself back. Let the thoughts go. Over and over.

Many people say it is hard or frustrating. And it is…IF YOU ARE THINKING ABOUT RESULTS! And results thinking is what we are trying to avoid. It is an exercise. It is not about a goal of keeping our mind clear. We simply bring focus back to clear/empty when we get distracted.

How does this help us?

1. We are learning to let go of the result.
2. We are tapping into the Observer in our mind which can monitor our thinking and bring things to our attention (being distracted or WHAT thoughts).
3. Over time we are calming the mind, creating more space to be calm and present regardless of circumstance.

Hopefully you see how incredibly important these can be for trading. For example, if you are trading and impulses start to flare, #2 can help. If you can observe your thoughts and say “Whoa…that’s not ideal for trading” then you have noticed an issue and you can come up with a plan: “I’m going to take a walk around the office for a minute and calm my impulses by reminding myself that following my plan works best over many trades because I can never know what the market is going to do and it minimizes my post-trade regret.”

If you can do that (using your own words in the moment), you are doing to be a WAY better trader than someone who is just a slave to their thoughts.

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Examples of How Successful Traders Think Differently Than Unsuccessful Traders

We all have random thoughts pass through our minds. So it is not that successful traders never have impulsive or sabotaging thoughts pass through their minds. They do, but they can quickly identify them and start thinking more productively.

Here are some examples of unproductive thoughts, coupled with more productive thoughts. If you notice the unproductive thoughts (these were all thoughts I had in the last few days while trading), note them and then bring the more productive thoughts to mind.

Unproductive and Productive Thinking Before a Trade

I suggest writing down the unproductive and sabotaging thoughts that go through your mind while trading. This way you are aware of them and can more easily identify them when they pop up in the heat of the moment before, during, or after a trade.

Also, write down your own productive thoughts that are applicable to you and your strategies. I have just included some of my own productive thoughts that I tell myself, but you may want to write down your own to have handy while you are trading.

Unproductive Thoughts:
Is this setup the one (that will run/kill me)?
(Maybe) It could go.
It kinda looks like a X/Y/Z pattern.
I could maybe make some money here.
I’ll just jump for a bit.

Productive Thought (replace the above with something like this):
Is this a really good setup with good reward:risk potential and minimal red flags? If yes, I’ll take it. If not, no thanks.

Unproductive and Productive Thinking During a Trade

Unproductive Thoughts:
What should I do?
It might keep going.
It’s going to reverse, I know it.
Why is it doing that!?
It has to go up/down!
I’ll give it a bit more room.
I’m just going to get out.

Productive Thought:
What are the rules in this situation? (if you don’t have rules for this situation, add some to your plan) I’ll follow the rules because that produces the best results based on my strategy.

Unproductive and Productive Thinking After a Trade

Unproductive Thoughts:
Ah ****, I missed that move!
Stupid market.
I’m awesome!
I suck at this.
That should have been a winner

Productive Thought:
Did I follow my rules? Did I trade according to my skill and mental faculties? If I did, that is great. If I didn’t, that is a mistake regardless of whether the trade won or lost.

After a trade, you want to be in a good mind frame for the next trade. If you are frazzled, talk through letting go of the last trade and what you need to do to get in a good mind frame for executing your process on the next trade. Back to WHY and HOW thinking, not WHAT/results thinking.

You can also check out How to Focus on a Trading Process Instead of Fixating on Money if thinking about money too much causes issues in your trading.

How Winning Traders Think – Final Word

Start incorporating these changes in your thinking and you will start to notice a reduction in mistakes and impulsive trades. It won’t happen overnight, because you may not even be aware that these unproductive thoughts are driving your behavior.

It will take some practice to start catching unproductive thoughts while trading and then having the self-awareness to realize it is happening and switch to some more productive thoughts you have written out for yourself. But if you can do it, results should improve accordingly.

By Cory Mitchell, CMT

Want to learn how to swing trade currencies, including strategies, and how to adapt to changing market conditions? Check out the Forex Swing Trading Course.

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.