Specialty Skills

Confidence In Yourself and Your Trading Process

Dr. Woody Johnson

Have you ever had a “bout of doubt” or were worried and anxious to the point that you couldn’t pull the trigger on a trade, or you violated a rule like prematurely exiting a trade to take a small profit? These are classic examples of having a crisis of confidence. Confidence is an essential component of your ability to plan, execute said plan and follow all of your rules while keeping commitments. And, when you begin to question your capabilities, that is, you fail to trust in you, the fallout can greatly affect your focus and the ensuing distraction can cause you to become even more frustrated, frazzled and fragmented careening you out of control. So, it’s safe to say that confidence is an integral part of the trading process and most traders understand that. But, what exactly is confidence? Merriam-Webster Dictionary (short form) defines confidence as: a feeling or belief that you can do something well or succeed at something; a feeling or belief that someone or something is good or has the ability to succeed at something; the feeling of being certain that something will happen or that something is true.

Of course, there is a major difference between having a belief in yourself and being arrogantly over-confident with hubris. For instance, consider the person who takes a novice weekend trading course and thinks on Monday that they are an expert. This is an example of false confidence which is quite dangerous to one’s trading account. There are countless illustrations of individual misplaced “beliefs” where someone believes they have the skill to do something which is not backed-up by true expertise. Research studies have demonstrated, and Malcolm Gladwell shares in his book “Outliers: The Story of Success,” that to become a true expert in something – say trading – takes about 10,000 hours of education, training and practice. In fact, people have lost more than money, like their lives, due to false confidence.

Constructing self-confidence necessarily means building your competence. As you learn, train, apply and practice your trading in ways that build skill, what also happens as you expand your competency is that you also build self-esteem; mouse click by mouse click and trade by trade. True confidence is directly related to and is a precursor of self-confidence and personal trust/belief in you. For those of you who have been afflicted with “lack-of-confidenceitis,” here are some additional ways to begin to build and support “self-confidence” in order to maintain a laser-lock on doing what it takes to get you closer to trading success.

Focus on what matters most: Your strategies, routines, rules, macro trade plan and micro (everyday) trade plans are just a few of the things that belong on your what-matters-most list. You must maintain a fierce focus on these crucial items. Just as air, water, food and shelter are critical to your survival; the aforementioned are critical to building self-confidence.

Document: In order to effectively uncover what’s not working in your trading you must measure and document your issues as they surface so that you can begin to address and resolve them one trade at a time. Keeping a trade log of your mechanical data set-backs and a thought journal that identifies internal data problems will not only make you a stronger trader, they will also bolster your confidence.

Celebrate private victories: Private victories are those times when you didn’t move a stop even in the face of fearing that you’d be stopped out, or when you didn’t chase that trade even though part of you was lobbying fast and furiously to do just that, or when you didn’t double down on a loser despite the voice inside that shouted “But you can get your money back faster!” In these instances and others like them you stayed the course and you deserve to be recognized…so give yourself a good pat on the back and uplift your self-confidence.

Attend to details: More times than not what makes the difference in success equates to the small rather than the large things. The details matter…much. Pay attention to what you are doing in order to remain on-task and on-top of important items in your trading process.

Avoid comparing yourself: Everyone is unique with different backgrounds, personalities and predilections. Even people of the same family of origin have different mindsets, attitudes and approaches. So, be sure to cultivate an independent outlook and avoid comparing your results to someone else. It may take you a little less or longer than someone else to achieve the same or similar outcomes. It simply doesn’t matter. Maintain your focus on you and your path.

Manage your emotional state: Negative thinking creates negative emotional states. One of the ways to do this is to monitor your thoughts and change negative ideas when you become aware of them. Also, make a list of your past accomplishments and use this thoughtful reference as proof that you deserve success; you’ve done it before and you’ll do it again. And, those achievements that represent a particularly huge challenge are especially effective for this. This will counteract the tendency to beat yourself up after making a mistake.

Cultivate patience with yourself: We are all works-in-progress and you deserve a gentle hand as you negotiate the difficulties of trading. As the cliché goes, “…Rome was not built in a day,” and as well, your skill levels will take time to develop.

Free Trading WorkshopConfidence and trust in yourself is vitally important to doing what it takes to remain focused and trade with your A-Game, your highest and best trader. These are some of the things that we teach in “Mastering the Mental Game” Online, On-location and XLT courses. Ask your Online Trading Academy representative for more information. Also, get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading

Dr. Woody Johnson


This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.