1. Trading encourages disciplineContrary to the “Get one million pips in a month” ads we’ve seen, trading is far from easy. Just like professional sports and other high performance careers, trading is a craft that must be honed day in and day out. And just like other professions, trading requires discipline.
Developing discipline requires planning, tons of practice, and turning those planned tasks into habits. In trading, discipline is acquired by taking the time to study the fundamentals and charts, sticking to the trading plan, and even logging in trade journals. Remember that there’s a name for trading without discipline – gambling.
2.Trading pushes us to go beyond our comfort zoneFor most people, risking money is very uncomfortable because after all, nobody wants to lose their hard earned cash. This leads to common uncomfortable trading scenarios such as “cutting winning trades in fear of them turning into losing ones,” or “not cutting losing trades quickly in hopes that it will turn into a winner.” In other words, it’s more comfortable to hold on to losers and cut winners quickly–the exact opposite of what traders are supposed to do!
As the great trading psychologist, Dr. Brett Steenbarger, once said, “Your growth always lies on the other side of your discomfort. Whether it’s in the weight room or career decisions, you’ll never develop yourself by staying in your comfort zone.
3. Trading teaches us about emotional balanceI’m sure that many of you have gotten burned by overconfidence. You believe that you’re on a roll and that you can’t lose, so you end up taking trades without taking the time for proper analysis. You end up taking dumb trades, or risking way more than you should, and before you know it, your account gets hit with a massive loss.
I’m also sure that more than once, you’ve found yourself paralyzed by the lack of confidence. You spot a great setup that you would normally take, but because you’ve lost your last 5 trades, you decide not to take the trade. And of course, the pair ends up going in your direction and hitting your take profit point. Yikes!
In trading we learn that we can’t get too caught up when we’re winning, nor should we be too hard on ourselves when we’re losing. Eventually, all traders also learn that the best state of mind is one that is both even-tempered and relaxed.
This is true in other aspects of life as well. People make poor decisions when they wear their emotions on their sleeve. They get taken advantage of when they are overconfident, or miss out on good opportunities when they are scared.