Preserve Your Mental Capital.
You can't afford to lose it
Good morning folks,
As we all know, trading demands a high degree of mental fortitude and emotional control.
This week was particularly brutal, especially for the major indices like the S&P 500, Nasdaq, and others. We were in a volatile range that had countless failed breakouts and random movement.
There were only a few good opportunities. Most of the time, the market offered trades with horrible risk/reward and no sense of direction. Many traders blew up their accounts trying to trade everything before they could find good trades.
Even if their account wasn’t blown up, they were so far in the red that a good trade would just bring them back to breakeven…
When it comes to reading price action, you have a limited amount of mental capital, just as you have limited financial capital.
If you’ve had a short bias for the last six trades and they were all devastating losses, it will affect the way you take your next trade. You could come across an A+ short opportunity, and you’ll be afraid to take it. Even worse, you might go long.
Every trade and experience is logged into your brain. If it’s full of bad decisions and emotions, you’ll have an unconfident, emotional mind.
It’s like trying to get in shape while binge-eating Mcdonald’s and eating six times a day. Whether you like it or not, it will affect your progress.
To preserve your mental capital, know this:
Trading cannot be your entire life. You must have other work/experiences in your day, or it will be very hard to not check your charts all the time. Staring at the charts too long is like staring into the void. Eventually, you go insane.
Say no to almost everything. Be highly selective about the trades you take and the information you consume through your chart. There will be hundreds of setups that form daily, and 95% are terrible.
Take breaks. Everyone needs to clear their head. Know when you’ve had too much, and take a walk. If you let an electronic device overheat for too long, it will eventually explode.
I profited this week without damaging my mental capital using supply/demand zones, since they would keep me out of bad trades and not have me staring at the chart every second. If you want accurate plans and levels every day, upgrade below.
As always, happy trading :)
- Tradewriter
Disclaimer: Investing in stocks, bonds, futures, options, and other securities carries significant risks. Some or all capital may be lost. With leveraged instruments, losses may exceed initial capital. Past performance of a security does not guarantee future results. Any content from this newsletter should not be taken as financial or investment advice, but for informational and entertainment purposes only. This newsletter simply shares my personal opinions and notes. Consult with a registered financial/investment professional. This newsletter and its authors are not licensed financial/investment professionals. By reading and using this newsletter, as well as any other publications, you are agreeing to these terms.