Many traders are at a loss when it comes to trading. Literally and metaphorically speaking. They know how to trade, they are even experienced enough to be awarded a PHD in trading, yet they still don’t manage to keep their profits.
I mean, it’s so simple, let your profits run and cut your losses short. Which trader in their right mind wouldn’t want to do that? Yet it seems to be one the hardest things to do. Isn’t it that your mind wants one thing but your emotions ‘make’ you do another? Seriously, is that crazy or what?
What I keep seeing again and again is that one major influencing factor is definitely the trader’s relationship with money. Think about it, what is at the core of trading? What is the essence? Money, right?
Are you truly aware of your own money mindset and it’s effects on your ability to reach your trading goals? What did your family and wider circle of influence say about money? What was their experience with money?
You see, our adult self is in trading in order to be rewarded better than it would be possible any conventional way. We strive for a sizable income to provide a better lifestyle for our kids, families and of course enjoy financial freedom and leave that place of financial pain.
Most traders try so hard and even giving it their all, they still never make it. So sad and so unnecessary.
In my opinion the very first topic to explore for every newbie trader should be their relationship with money.
What Is Your Relationship With Money?
All of us have a relationship with money.. good and bad. This is called ‘money mindset’. Your money mindset determines how much profits you are able to keep without sabotaging your efforts with stupid losing trades. (not talking about the ones where you faithfully followed your system).
Many traders have blockages when dealing with money. You might fall into the camp that shies away from even wanting to think about finances, with the mere thought of sitting down to properly assess your financial position sending you running for the hills.
Or you are one of those who get itchy the moment they have money. You can’t spend it and get away from it quickly enough, like someone who has bad breath.
Or maybe you see money as something positive and like to be around it, yet your priority is to treat your loved ones to gifts or holidays, and once again you aren’t able to keep money in your bank account for very long.
Or you might be in another camp. You are aware of where every single penny is going, spend wisely, and you’ve made meticulous plans for your and your family’s financial future.
No matter how much money you have, there is always a sum saved somewhere ‘just in case’. You have a positive mindset, choosing to keep hold of as much as you can for as long as possible whilst meeting your responsibilities on time every time. Your relationship with money is a good one.
So, what separates the two?
Your Money Mindset!
If you for example grew up with a ‘us and them’ experience of wealth, those early experiences will affect how you view your personal wealth as your adult self.
If you grew up hearing phrases such as ‘we can’t afford it’ or ‘look at him in his flash car… (he things he is better than us)’ anything that creates a sense of something that seems out of reach or a feeling of contempt, you may have been left with a sense that rich = bad.
I am sure you are aware of how cartoons or modern children shows such as the enormously successful Saddle Club show rich people as heartless, mean and often cunning and therefore are being separate and not excepted by the girls who are having close friendships and fun, so they are essentially expelled from the herd whilst the poor people are the nice ones who have lots of friends and fun.
Unfortunately I can’t make a general statement that ‘rich’ people are all nice and considerate, there are a lot of people who display their riches with an obnoxious attitude.
And whilst there are mean, heartless rich people out there there are also mean and heartless poor people just like there are many kind hearted and generous rich and poor ones. Money is kind of like the gun, it is not the gun that kills it is the person who uses the gun.
The question is how will your attitude be once you are extremely wealthy?
Most people never investigate their beliefs about money, so, all the time you are struggling financially, you feel good about yourself. Your financial challenges fuel your self-image.
But as soon as you start getting paid what you’re worth, and accumulating wealth, the guilt kicks in, you feel unworthy of the increased income, and your child self worries people will think you are not a nice person anymore and will lose all your friends.
So, your child self gets rid of that wealth, putting you right back into your comfort zone of financial struggle.
If you are wondering why you are making good profits in your trading but still battle off those mindless losing trades that destroy your trading account, ask yourself if it could be your negative money mindset that is behind this behaviour?
But like any self-limiting belief, you have the choice whether to allow your negative money mindset to carry on hurting your trading bank or not. You can choose to leave it in the past where it belongs.
If you are striving for financial freedom but finding it difficult to get to where you want to be, you may need to work on your money mindset. Only then will you be able to grant yourself permission to attract the financial stability you desire.
Working on your Money Mindset
Therefore the best place to start cleaning up your trading house is to start investigating your relationship with money. If you want to create consistent profits and a nice uptrending income curve, you must understand the quality of your emotional attachment to money.
The first step is to go back in time and remember an instant when you made a lot of money and when you lost a lot of money. How did you react to making or losing money? How did you feel? What did you say to yourself? What did you do?
How do you feel about money in general? What are your believes around money? How do you react to losing money and making money?
Ask yourself some simple questions, and answer with the first word that comes to mind (no matter how weird it seems to be):
1. What does money mean to me?
2. How do I feel when I lose or make money?
3. How and where did I learn the value of money? Who were my role models and what do they believe about money?
4. How and where will I get the money I am trading with? And what does it mean to me?
I hope this was interesting and useful for you. With a toast to your trading profits
P.S. If you need some help discovering your money mindset and what causes you to self-sabotage your trading success, why not book a coaching session?