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Trading Psychology: Mastering the Art of Detachment

By Alan Edward


Trader Meditating

The Key Skill Every Trader Must Learn


A great trader needs to learn the power to detach and move on.


I believe this is the single most important skill to create in trading.


In the fast-paced world of trading staying present and not letting the short-term noise affect us is key.


For example,


It's important to document and track things like mistakes, missed trades, etc so we can learn from them and reduce them in the future.


But it's vital once you've registered it you avoid ruminating over it excessively


It's this spiral that causes most traders to go on tilt.


They stay with it for too long trying to solve and fix it in their heads going over and over it.


Which creates a type of madness.


It's this tendency to overthink and try to find answers and solutions in their head that ends up affecting their ability to take the next trade and the next and so on...


''When we feel bad the default process is that we should think more about the problem, when in reality we should think less.'

The Key Is To Learn Detachment 


Detachment means doing nothing to thoughts so that the mind can regulate itself from negative emotions.


It is like watching a movie inside your mind without participating in it.


Another analogy is to think of the chatter in your head as a monkey or as Buddhists refer to it the ''monkey mind.''


The key is to not chat with the monkey mind the more you feed it the stronger it becomes and the opposite is just as true.


The less attention you give it the weaker it will become and the less power it will have over you.


Detachment in trading

How To Do It? 


Step 1: Observe and step back from the thought 


The idea here is to allow your negative thoughts to be there without getting caught up in it.


The next time you notice a negative thought coming up


(for example, “I’m a failure“)


Take a step back from the thought and observe it from a distance like you would observe a painting.


As you are doing that, notice that you are only an observer of the thought and that you are separate from it.



Step 2: Postpone rumination/worry till later 


When you notice a negative thought


(for example, “Why did I do that, I'm so stupid, I should have done this....“)


Acknowledge the thought and don’t engage with it.


You can say the following to yourself...


“There is a negative thought; I am not going to deal with it now or worry about it.”


You mustn’t try to push the thought away or try to work it out.

The goal here is not to get the negative thought out of your mind but to refrain from analysing it until later.


A good way to deal with it is by setting a time later in the day for at least an hour later (If you can do longer then that's even better)


And come back to it then and if you really need to, you can allow yourself to worry then.


You don’t have to use that time.


Most traders I work with in the 1-1 Coaching decide in the end that they don’t need to.


What this does is it lets the thoughts and emotions have time to cool down


Just like a hot drink, it may be too hot at first so we leave it a while to cool down and then go back to it.


This is essentially what we want to do with our thoughts.


Give them time to cool down and then go back to them if we wish when the intensity of thoughts has had time to die down.


So then when you do go back to them you can deal with it from a more balanced and logical state.


In trading, this is an important part because if we keep obsessing over these thoughts constantly then it distracts us from the current job at hand.


And what you'll often find is that you will often forget about whatever it was that was bothering you at the time or that the thoughts themselves were not really that important.


Step 3: Redirect Focus 


Once you make the decision not to engage in it you then need to redirect your focus on something that will help distract you from it.


Now don't distract yourself with doing something that makes you feel good because that is just a coping mechanism.


Focus on something important to do.


In a trader's case, it will most likely be to focus on following our plan for the next trade.


And that's it!


It may seem simple but once you have this down it will be one of the most powerful tools in your arsenal.


Conclusion 


Detaching and redirecting focus is a skill that will set you up for success in trading.


It really is the key skill to trading like a pro.


It will take some practice just like building a muscle, but the more you do it the stronger and better you'll get at it.


Thanks for reading and have a great day!


Your friend,


Alan Edward

THE DIVERGENT TRADER


====


P.S. Whenever you're ready, here are 3 ways I can help you further:


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