Thursday Trader's Tip: How the All-or-Nothing Mindset Hinders Trading Progress

Thursday Trader's Tip editions offer quick trading psychology advice that can be digested in 5 minutes.

Oct 17, 2024

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Watch this edition video at the end of the post.

What’s worse than making a mistake? Letting it drag you into a cascade of mistakes.

Something I see very often is traders throwing everything away after they’ve made one small mistake that they perceive as being the end of the world. This is just one way that perfectionism interferes with progress.

Everything you focus on tends to come true. If you go into the session focused on not making mistakes, you end up making them.

There are two types of traders:

Trader A makes a mistake, realizes it, accepts it, and moves forward as a clean slate.
Trader B makes a mistake, realizes it, doesn’t accept it, uses the frustration to make the next mistake, and so on.

The thing about big losing days is that they mostly start as small mistakes.

Think about it:

Before a trade taken outside of strategy, the trader took early profits on the previous trade.
Before an oversized trade, the trader took an off-strategy trade that was a loss.

The first mistake hardly creates a big blow-up.

The mistakes that mostly break your confidence are the ones you make in awareness.

You had a space to re-establish yourself after the mistake, but you chose not to, and because of that, you let the pain drag to a bigger mistake—and that’s the biggest mistake itself!

In the thrill of the moment, you don’t even think about it, but afterward, you realize you could’ve cut the bullshit way earlier than you did!

There’s a mindset that promotes this type of behavior, and that’s the all-or-nothing mindset.

Traders feel so bad about making mistakes that they can’t handle their self-image after making one.

If the only thing you see is both extremes of the spectrum, then you’ll tend to swing to one of its sides — if you can’t be perfect, you might as well go reckless and spoil the rest of the performance.

There’s a lot of shame in the mix — at the moment, traders believe they've done more damage than they have. They think, “In for a penny, in for a pound,” and end up becoming the very person they were trying to avoid.

So, this week, I’m not asking you to stop making mistakes. That goal will only put you under pressure to perform.

Instead, I’m asking you: how can you minimize them? Here are five steps you can follow to prevent big blow-ups:

Recognition of the first small mistake that initiates the cycle
Take five
Think about the possibility of that mistake becoming bigger (losing more money, the feeling you’ll get at the end of the day)
Imagine yourself in that scenario — close your eyes and feel the pain of the bigger loss.
Open your eyes, return to reality, and think about what you must do to avoid that!

You have more control over your decisions than you might think. That control comes from taking full accountability for all your decisions and their impacts.

So, adapt this five-step process to your needs and start using it today!

Peaceful trading,

Sara