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.
Henry David Thoreau
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.
Reprint from PrudentTrader Archives 2005