Techniques for Mastering Our Trading Psychology

 

8/28/2026 - We have to lose many times before we internalize the resilience to know that we have what it takes to succeed.  If each loss is a learning lesson that we review in intensive detail and burn into our brains, then we have moved forward in our development even as we step back in our P/L.  It's necessary to bounce back many times before we truly know that nothing can keep us down.  Confidence doesn't come from positive thinking.  It comes from overcoming loss, again and again.

In his book Best Loser Wins, Tom Hougaard points out that "An elite soldier is scared to death the first time he is in a combat situation.  That is why his first combat situation will be a simulation.  And the next one.  And the next one.  And little by little, his fear is trained out of him, through the use of repetition, breathing awareness, and habituation" (p. 37). 

We start by trading in simulation mode or very small.  We lose.  We jump at the opportunity to learn from the loss:  learn how to better enter and exit, how to better identify opportunities.  We lose again.  We again jump at the opportunity.  As we start to win, we get a little bigger.  We lose.  We delve into learning from the losses.  Again and again.  Soon, as Hougaard notes, our fear is trained out of us.  It's not that we're confident that each trade will be a winner.  We're confident that our development will win even when we lose.  We know that our development will win *because* of what we will do when we lose.  Turning losses into learning is perhaps the most important trading psychology technique.  The intensity and repetition of our learning is directly responsible for its impact on our mindset.