Think Like The 5% - Market & Mindset Consistency

psychology Mar 17, 2024

In the realm of trading, a stark statistic often captures the attention of newcomers and veterans alike: 90 to 95% of traders fail. This figure, while daunting, shifts the focus onto a critical question that most in the trading community overlook. Instead of dwelling on why the vast majority fail, a more productive inquiry is to explore what the successful 5% do differently. Their secret? Consistency. But not just any form of consistency—there are two distinct types that set them apart: the consistency in action, particularly in journaling and documenting trades, and the consistency in mindset towards trading itself.

Defining Success and Consistency in Trading

Success in trading doesn't necessarily equate to winning every month. Instead, it means sustaining the energy to improve daily, becoming an elite performer through an unwavering willingness to learn. This perspective requires us not to belittle another's success or to underscore the challenges of achieving consistency in the industry. A practical gauge of a trader's success can often be their track record. This record isn't just a tally of wins and losses but a detailed account of market decisions, the rationale behind them, and the outcomes. Surprisingly, few traders maintain such comprehensive records, and even fewer are willing to share them, often due to fear of exposing their struggles. Yet, it's through acknowledging and learning from these struggles that genuine progress is made.

The Dual Facets of Consistency

Consistency in trading manifests in two primary ways. The first type involves the diligent action of journaling and documenting every trade. This practice is not common among the unsuccessful 90 to 95%, who either neglect this discipline or fail to see its value. On the other hand, successful traders treat record-keeping as a cornerstone of their strategy, irrespective of their trading style—be it scalping, day trading, or swing trading. They understand that a detailed log of their trades is crucial for learning from their mistakes and honing their decision-making process.

The second type of consistency pertains to the approach to trading itself. Successful traders internalize that losses are an integral part of the game. They comprehend that no single system can guarantee success across all markets and conditions. This acknowledgment allows them to remain resilient during losing streaks, understanding that periods of loss are merely setbacks within a larger strategy. For them, a successful year might involve winning for six months, losing for three, but ultimately ending the year ahead, having learned and adapted from each experience.

The Importance of Record Keeping

All successful traders share one common trait: they are meticulous record keepers. This habit is not just about tallying wins and losses; it's about creating a system of accountability and reflection. By reviewing their performance regularly, these traders can identify patterns in their trading, adjust their strategies, and improve their decision-making processes. It's a continuous cycle of learning and adaptation, with each trade providing insights that contribute to their overall success.

Facing Bad Months and Mitigating Losses

Even the most successful traders face bad months. The key to their sustained success lies in their ability to mitigate losses and not give back their gains. This requires discipline, such as setting strict stop-loss orders, and the emotional intelligence to accept losses without deviating from the plan. Successful traders view each loss as a learning opportunity, adjusting their strategies without compromising their overall objectives.

Shifting the Narrative

The narrative that focuses on the high failure rate in trading serves only to lower the bar and skew perceptions. It creates an environment where the emphasis is on avoiding failure rather than striving for success. Changing this narrative involves highlighting the practices of the successful few, emphasizing the importance of consistency in action and mindset. By doing so, we can shift the focus from the percentage who fail to the behaviors that contribute to success.

In conclusion, the journey to becoming a successful trader is fraught with challenges and setbacks. However, by embracing the dual facets of consistency—meticulous record-keeping and a resilient approach to trading—traders can significantly improve their chances of success. It requires a shift in focus from fearing failure to learning from it, and from viewing success as a series of wins to seeing it as sustained improvement and learning. Ultimately, the path to trading success is a testament to the power of perseverance, discipline, and the relentless pursuit of learning.

Other resources used:

Prop Firm Stats:

https://learnforexwithdapo.com/prop-firm-statistics/

SMB Capital post:

https://www.smbtraining.com/blog/the-failure-rate-of-a-proprietary-trader

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