In any performance endeavor, confidence plays an absolutely crucial

role in success or failure. Trading confidence is exactly the same.

Relatively new traders are often particularly prone to issues relating to confidence. A new trader comes along and has little to no frame of reference

for what competent trading really looks like and therefore is susceptible

to emotion-based assessments of their own abilities.

And it’s this inability to objectively identify skill that frequently leads

down one of two paths in the early days of a trader’s career.

The first path is one begins with a relatively easy and baggage-free type

of trading. This sort of trading is uncomplicated by past experiences and often leads to a trader simply

executing what they see.

They take trades when they see them – they execute both their winners and

losers without prejudice.

Over a short period, this freedom of execution can and often does, see a decent winning streak. The issue can

be that a trader in this situation becomes over-confident.

However, the inability to recognize the reasons behind their winning streak

and the lack of core knowledge combined with an unfounded

cockiness can be a dangerous cocktail.

When their trading starts to falter, they can plunge into an even bigger

losing streak.

There is an alternate path that some traders follow – it’s one of complete

uncertainty. A new trader may recognize the fact that their

knowledge is patchy at best and that is a sure-fire way to make them risk-

averse.

An issue for this type of trader is that they may become obsessed with

learning as much as they can and by not trading much, they fail to learn execution lessons that can make a

huge difference to trading performance.

But there’s another aspect to consider here – if you don’t believe you can win and be successful, are you genuinely

going to be motivated and focused on actually taking trades?

Everything in life is about finding a good balance. The over-confident and

cocky trader whose self-belief has been artificially boosted by a good run

of results, should take the time to objectively analyze reality before the

market hands them an unpleasant and costly lesson.

But a healthy swagger/self-belief coupled with a willingness to accept

defeat, can bring out some of the qualities that can help a trader to

succeed.

The ability to fully focus on trading certainly is easier when you feel that

you can win. Competitiveness can help you to drive forward and simultaneously innovate.

Self-value makes you believe that you are worth the effort. An unshakable

self-confidence and determination to continue in the face of setbacks helps

you to ride out losing streaks.

A trader who does not truly believe they can succeed, will find it

increasingly difficult to continue.

In order to find that balance in your trading confidence it’s essential to

base your beliefs about your ability on something more concrete than

feelings. This is partly why taking regular stock of your performance and

actual results is a critical step in facilitating performance.

But it’s also important to assess your overall emotional state relative to

performance over time to maintain awareness of the risks that you

currently face.

Finding that balance of trading confidence is not always straight

forward, but if you want to get there by design, you must first know where

you currently sit in terms of confidence and ability.