Developing the Right Mindset for Approaching Online Trading Like a Pro

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Professional traders have a different mindset when compared to average retail investors like Forex, stock, or crypto traders. This is because they have developed a certain skill set which allows them to objectively analyze the market and stay calm and alert during volatile market hours. 

The number one challenge for beginners is to have this mindset of thinking in probabilities rather than certainties. Let’s explain the right mindset for online trading success and provide a useful guide.

Developing the Right Mindset for Approaching Online Trading Like a Pro

Why mindset is crucial for online financial trading

Financial trading is not about predicting the future or being right or wrong. It is similar to gambling, however, financial trading is not gambling and allows millions of pro traders to make a living and generate profits far above the average salaries of standard jobs. Many beginners mistake trading for gambling as there are some distinct similarities between the two. Trading just like gambling requires traders to have a statistical analysis of their performance, have risk management, and allocate a certain portion of their capital for each trade. In gambling, gamblers also have to risk a portion of their money on each bet and there is a certain probability of winning or losing. 

There is no 100% win rate strategy and the majority of trading strategies generate 36-66% of winning probability. Meaning, from 100 trades, you are not expected to win more than 66 trades. Losing several trades in a row when real money is at stake is tremendous emotional stress for beginners and it is super simple to forget about rules and lose a considerable amount of your trading capital. This is where the correct mindset comes into the equation. It allows traders to manage their emotions and think about trading in terms of probabilities rather than certainties or being right or wrong. 

Emotions like fear and greed are the number one enemies of a financial trader. The fear of missing out on opportunities often is behind impulsive trading and causes serious financial ruin on the trading account. 

Professional trader’s mindset explained.

Here are pro trader’s main characteristics:

  • Patience – Pro traders wait for the right opportunities and do not trade out of boredom or emotional impulses. 
  • Discipline – They always stick to their strategy rules.
  • Resilience – They handle losses like it is the cost of doing business, without emotional stress

To achieve this state, traders need practice and slow building of their mindset. A professional trader’s mindset is not developed overnight. The best thing is to know all this information, start practicing on a demo account, and try to stick to your strategy rules. This will help you reduce fear and greed in your trading.

Setting realistic goals

Aiming for huge profits right from the beginning is the biggest mistake to make. Traders should correctly evaluate and set realistic goals to avoid frustration. Professionals focus on achievable, long-term financial goals, instead of becoming millionaires overnight with a few mouse clicks on a trading platform. Knowing and understanding the risk-reward ratio and gradual account growth is critical in financial trading. Properly setting risk and reward ensures traders protect their capital and achieve success in the long run. Realistic trading goals for beginners are: 1. Maintain their trading capital and 2. Risking small amounts for each trading position.

Learning risk management

Risk management is a cornerstone of successful financial trading. Without knowing core concepts such as sop-loss, take-profit, risk-reward ratio, and position sizing there is no long-term success. Stop-loss and take-profit orders are dedicated order types (stop orders) that automatically close open trading positions when the price moves in losses or profits to a predetermined level. The risk-reward ratio is how much you risk per 1 dollar of potential profits. For example, 1:2 risk-reward means a trader is expected to win 2 dollars for each 1 dollar risk they take. Position sizing is a trading lot size or trading volume. 1 standard lot size is 100,000 units of currency. Depending on your account size, position size or lot size should be calculated accordingly. 

Developing emotional control

Emotional control is the main advantage of pro traders over beginners. The best method is to make objective rules and stick to them without deviation. Surely you need to test your trading strategy on both historical data and demo accounts before you can call it a viable strategy. Here is how to develop strong emotional control:

  • Journal trades and emotional states
  • Practice mindfulness or meditate to reduce stress
  • Set clear rules about when to stop trading for the day

Building confidence through practice

Building confidence is critical in trading to flawlessly follow your strategy’s rules without deviation. Here are practical confidence-building steps:

  • Learn both fundamental and technical analysis
  • Use a demo account for practice and learn risk management
  • Analyze past trades in your trading journal and list areas of improvement

Everyone learns at their own pace and beginners should learn slowly and develop a trader mindset. 

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