Philip Stanhope, 4th Earl of Chesterfield
Trading is a profession where one must not give up in the face of adversity. "You've got to go into the trading day expecting to lose," is what some seasoned traders warn. It's not the most optimistic outlook, is it? Today's choppy markets requires more skill and persistence. To make the huge profits, you've got to take some risks. Taking risks means you must be ready to face some losses. Even when you control your risk on a given trade (which is strongly advised), you are bound experience periods where you encounter loss after loss and watch your account balance diminish. As much as you objectify the loss, and see it as merely percentage points, there's still part of you that experiences the loss and feels the pain. At these times, it is easy to fall victim to the "why bother" attitude. You might as well give up. It is at these times, though, when you must be the most persistent. You must believe that you can master the markets and recover from the slump. There's a right way to go about this and a wrong way to go about this, however. Persistence is a complex issue and an understanding of it will help you approach a setback with the proper mindset.
Motivational experts often argue that people's expectations of reward or punishment influence whether they will persist or give up. If you believe, for example, that there is no way you'll make a profit no matter how hard you try, you'll want to give up. On the other hand, if you believe that success is assured, you will not only persist, you'll enthusiastically charge ahead in anticipation of a reward. Trading isn't an activity where success is assured. New traders who open accounts are very enthusiastic. They tend to believe that trading is "easy money," but they soon face the harsh reality that market conditions change, and what worked in one market fails in another. From a motivational point of view, if you believe that trading is easy, that you are skilled at it, and that success is assured, you will persist. Such thinking exemplifies the overconfident.
Begin to think, "Profitable trading is almost impossible, but I can learn how the markets work, develop the requisite skills, and eventually achieve consistent profitability." Granted, this isn't the most optimistic way to look at trading, but it does hold some realism. It isn't overly optimistic. Profitable trading is "almost" impossible. The key word here is "almost." Acknowledge that trading is a challenge that few seem to master. By acknowledging the difficulty, you are looking at the world realistically and will be able to handle setbacks more easily. If you aren't overly optimistic in the first place, your hopes won't be easily dashed when you face a setback.
Next learn to develop the requisite trading and risk management skills. Here's where realistic optimism comes in. We know for a fact that there are traders who have developed trading skills and have realized success. It is realistic to hold this belief and it is realistic to believe that if you put in the time and effort, and get the proper amount of training, you can achieve profitability also.