Binary options trading is a field which can be extremely lucrative if you are successful, but it also imposes a number of daily challenges, each of which can be very taxing on your emotions and your resolve. Every day, every month, every year, you face a new beginning where you have to build up your profit from your existing balance. And every day, every month, every year, that profit is threatened again and again. Drawdown is a routine part of your life as a trader, even when things are going the way they are supposed to. You will have losing streaks, and you will regularly question your edge.
It is no surprise that most traders do not weather these challenges very well. Most will eventually wash out of trading. Whether that is from blowing a trading account or simply blowing a fuse, they will turn to a more predictable, stable source of income. But one trait which may help you to trade effectively and stay in the game is mental toughness.
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What Is Mental Toughness?
If you have any experience with athletics, you may be familiar with the term “mental toughness.” Sports coaches, commentators, and psychologists bandy this phrase around a lot, though often without strictly defining it.
A number of researchers have attempted to come up with a more formal definition of mental toughness. Some of these definitions are specific to athletics, but others have a broader application.
In particular, the definition proposed by Daniel Gucciardi, Sandy Gordon, and James Dimmock of Australia may be applicable to traders. These researchers were studying Australian footballers, and concluded the following:
“Mental toughness in Australian Football is a collection of values, attitudes, behaviors, and emotions that enable you to persevere and overcome any obstacle, adversity, or pressure experienced, but also to maintain concentration and motivation when things are going well to consistently achieve your goals.”
In other words, mental toughness isn’t any one thing. It is actually an assortment of things.
What comprises mental toughness may not even necessarily be 100% the same from one individual to the next.
It is also interesting to note that mental toughness is not just relevant in situations of drawdown, but also during times when you are winning.
You are probably familiar with the phenomenon of going “on tilt.” This is what happens if a trader loses emotional control. It is widely acknowledged that this can happen during a losing streak, but many people do not realize it also can happen during a winning streak.
In both cases, it is likely that traders go on tilt in part because they are lacking in mental toughness.
8 Traits Which Can Boost Mental Toughness in Trading
So if you are trading binary options, what are some traits which can increase your mental toughness and help you to stay on target when things are going badly and when they are going well? Here are a few ideas:
This is a big one. You do not want to be blindly optimistic, but you definitely need to have a hopeful attitude if you are going to prevail through difficult circumstances. Think of yourself as a sailor at sea. A sailor never has complete and total control of his ship or his life, but he knows that the vast majority of sailors will get from port to port successfully. This helps him to weather rough seas or literal doldrums. When it comes to navigating your metaphorical doldrums or rough seas, the same attitude can also help you to survive from one day to the next, both financially and psychologically.
This is another key trait when it comes to staying in the game while trading. With binary trading, you are quite literally making a living from the process of change. But sometimes those changes are quite big, and swing outside the effectiveness of your existing system. These are the times when you may question everything and when mental toughness really needs to come into play. If you are adaptable, you will be able to take steps to change your system—and sometimes yourself—as needed to keep up with the changes on your charts.
Grit is actually a psychology term, even though the word is often used colloquially. Actual grit is defined as your passion to achieve a long-term goal coupled with the motivation to continue striving toward that objective. If you have grit, you are able to stay the course. How is this different from perseverance? Psychology tells us that grit is actually more fundamental than perseverance —it is one of the ingredients of perseverance. It also differs from persistence in that persistence can be dispassionate. Only individuals who are truly passionate about what they do can display grit.
Resilience is closely related to grit, but grit can exist without hardship (it is what allows you to power through when things are routine and dull for example). Resilience is your ability to overcome adversity. In trading, you are going to encounter plenty of hardship, so resilience is essential if you want to continue working toward your objectives.
If you cannot believe in yourself as a trader and as a person, you will not be able to stick to anything that you do effectively. You will constantly second-guess yourself, and this will take a toll on your mental toughness. In fact, confidence and self-esteem are cornerstones of mental toughness. Without them, you do not have an anchor. Your personality and your universe are both subject to the whims of fate, and that then extends to your trading account. Your trading account will always face uncertainty, so it helps to at least have some certainty when it comes to your perception of yourself and your approach.
We have all heard the bromide that wisdom lies in knowing what you can and cannot change and giving your attention to what you can change. That is true, even if it sounds trite. If you are constantly wrestling to control something you never will be able to (like the market), you will spend all your energy and focus without getting anything back but pain. But if you focus instead on what you can control (your actions), you give yourself the best possible chance at using your energy effectively and profitably.
7. Living in the now
The more time and attention you give the past, the more you will dwell there. It is true that past experiences have something useful to contribute to your knowledge, but that contribution is limited. Your situation a month ago or a year ago or ten years ago is simply not equivalent to whatever you are facing today. Many factors are different. By focusing on the past, you will spend your time worrying—not adapting in the present. Worse, you may even restrict your vision to the point where you cannot see the present or its opportunities clearly.
8. Focusing on your own business
It is easy to get caught up in what other traders are doing. You may look at the success of people who you know online and envy it when you are struggling. But thinking constantly about your millionaire trader friend who lives in a yacht and travels the world will do nothing to toughen you up. It will only demoralize you and drag you down. Stay focused on the business of your own trading as well. Do not compare yourself to others. Work toward impressing yourself, not impressing them. Acknowledge that your situation is unique.
All of these traits can combine to help you to focus on the positive aspects of trading and not get caught up as much in the negative when you are losing. At the same time, they can help to temper your decisions when you are on a winning streak and may lose perspective. The more work you put into developing mental toughness, the easier it will be for you to successfully weather the ups and downs of trading each day without losing your equanimity.
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