Mental Momentum

As a single footstep will not make a path on the earth, so a single thought will not make a pathway in the mind. To make a deep physical path, we walk again and again. To make a deep mental path, we must think over and over the kind of thoughts we wish to dominate our lives.
Henry David Thoreau

When you're under a great deal of pressure, it is easy, even common, to choke. The stress, being on edge, make it extremely difficult to make decisions or to look at your current trading predicament objectively. When you have a drawdown, you can feel a little disappointed, a little stunned. After you've made a series of successful trades, you feel much more powerful, as if you can relax a little bit, and when you feel relaxed, you are more creative in approaching your trading strategies. Everything seems to click and you start trading effortlessly and profitably. It is extremely difficult to feel such empowerment when you are falling behind, or stuck in a rut, not making any headway. There are two types of momentum in trading. There is profit momentum and mental momentum. Mental momentum can be just as important as profit momentum.

We feel mental momentum when we believe we have made our best effort, when we feel that we have done everything we possibly could have done. At these times, we should pat ourselves on the back for a job well done. While trading, we usually forget to give ourselves credit when we have put in a good effort. We become so focused on profits and those efforts that produce profits. In order words, we focus exclusively on performance goals, while completely forgetting about learning goals, which are equally important.

Instead of focusing only on a performance goal, focus, also on other goals that are equally important, but may not always directly produce a profit. There are many modest goals that

can be achieved easily and deserve a reward upon completion. Break down the goal of making a huge profit from a few good trades into specific steps that are doable, and should be rewarded. For example, studying for 10 or 20 hours a week or learning a new trading technique is important and worthy of reward, even if the reward is just a personal sense of accomplishment. The specific goal may not immediately lead to your larger goal but it is easy to achieve, and will lead to personal satisfaction upon completion. In the long run, this alone will contribute to the attainment of your larger longer term goal of becoming a seasoned, profitable trader. The more you complete these modest goals, the more mental momentum you achieve.

Give yourself credit for all the effort you put into trading. It is tempting to feel good about your efforts only when they pay off, but you put in just as much effort putting on a losing trade as a winning trade. Regardless of whether you win or lose, you'll feel better if you reward yourself for all the work you do, regardless of the outcome. The more you reward yourself for all the work you do, the more mental momentum you will feel. This, in turn, will make you feel strong and empowered, allowing you to trade more effortlessly and profitably.

Reprint from PrudentTrader Archives 2005