Protect Your Mindset at All Costs
The most important (and often overlooked) concept in trading is the following: Your mindset will ultimately be the deciding factor in whether you succeed or fail as a trader.
Think of it this way: Traders do not ultimately fail due to blown up accounts – they can save their money and start a new account (as most successful professional traders have done, sometimes multiple times). Traders ultimately fail due to experiencing a fatal blow to their mindset. Once your mindset is severely damaged, it can be next to impossible to find the strength and courage to continue persevering towards your original goal of being a successful trader. It is for this reason that you must do all that you can do to minimize the possibility of experiencing a fatal blow to your mindset if you want to be a part of the minority of successful traders by proactively developing a strategy to strengthen and protect your mindset.
I highly recommend reading both “The Daily Trading Coach” (by Dr. Brett Steenbarger) and “Trading in the Zone” (by Mark Douglas). Each book has some incredibly effective approaches to aid in the development and strengthening of a trader’s mindset.
Psychological and Emotional Diversification (Life Balance)
The concept of balancing one’s life is a familiar one to most traders, however, many traders, due to their strong desire to become successful, often struggle with life balance. Though there is no denying that in order to become a successful trader you must put in long hours in order to gain experience in the marketplace, when you neglect to diversify your life from a psychological and emotional perspective, you inadvertently put all of your psychological and emotional eggs in one basket, which in turn puts your mindset at great risk.
In the book “The Daily Trading Coach”, trading psychologist Dr. Brett Steenbarger does an excellent job of explaining the benefits of diversifying yourself psychologically and emotionally as well as the pitfalls of failing to do so. If you place all of your psychological and emotional eggs in one basket, then you drastically expose yourself to feelings of deep unfulfillment and unhappiness if (and when) you face a setback in that particular area of your life. As a result, this can make it incredibly difficult to make progress in that area and, even worse, can potentially impact other areas of your life as a result of feeling so deeply unfulfilled. This is precisely why it’s essential to make an intentional and focused effort to balance your life, to distribute your psychological and emotional eggs more evenly into many baskets: if you experience extreme feelings of unfulfillment within the primary area of your life in which you regularly turn to for fulfillment and happiness, then you put yourself in a precarious situation in which your mindset is susceptible to great, potentially fatal (in the context of your trading career) damage.
By better balancing your allocation of time and energy across the numerous areas of your life which bring you fulfillment and happiness, you will take the pressure off of having to rely on your progress as a trader to constantly make you feel fulfilled and happy which, as a result, will strengthen the firewall that surrounds your mindset.
Listen to this excellent Chat With Traders interview with Dr. Steenbarger which touches on the importance of life balance in the context of trading.
Track Your Life Balance to Strengthen Your Mindset
Though obtaining life balance is the ultimate goal, it is a goal that is never truly completed. Instead, it’s part of a life long journey – a journey that must be tracked over time to ensure that you are progressing along the way, just like any other goal.
Just as I created a tool to Objectively Grade Trades and Days , I also created a Life Balance Tool to objectively track life balance and psychological & emotional diversification progress on a daily and weekly basis. Here are a few screenshots from both the Daily and Weekly Life Balance Tool, respectively:
Watch the Screencast Tutorial for the Life Balance Tool
The following video is a 52 minute audio narrated screencast that I created which will walk you through the process of using the Life Balance Tool to track your life balance progress. In addition, I’ve included a link (directly below this video) to view and either 1) make a copy of (for Google Drive) or 2) download (for Excel) the Life Balance Tool for your own personal use. Please make sure that you watch the video prior to using the tool in order to ensure that you are using it as it’s intended to be used.
Make a Copy of or Download the Life Balance Tool Google Sheet for Personal Use
Here is the link to my Life Balance Tool Google Sheet document as described in this post. Though the document itself is not editable, feel free to “Make a Copy” within Google Drive by going to File -> Make a Copy (you need a Google Drive account in order to be able to do this). As an alternative, you can download it as a spreadsheet file which can then be opened in your offline spreadsheet app of choice by going to File -> Download As and then selecting your desired file format for export. After you make a copy of or download the document, you can edit and use it without restriction.