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Closing the Gap

Closing the Gap

Do you ever start the trading day feeling that there's little chance of making a profit? You just stare at your screens, stuck and disappointed. It's at times like these that an optimistic attitude can reenergize you. Rather than pessimistically thinking there are no opportunities, you'll be ready to search for new ways to make a profit when you approach trading with an optimistic mindset. Trading expert Mark Douglas argues that traders should try to close what he calls the "reality gap." According to Douglas, "there is a huge gap between what is possible from the market's perspective, which is virtually anything, and what is possible from the trader's personal perspective." Traders' expectations are limited in terms of what they think is possible to take out of the markets. The opportunities, however, are abundant.

Winning traders persist in the face of seemingly endless setbacks. It takes a rare person to be able to quickly pick oneself up after a hard fall and enthusiastically face another potential setback. Dr. Martin Seligman has studied how an optimistic mindset helps people persist when beaten. He has studied several occupational groups from top notch winning athletes to traders on the floor of the exchange. Optimism is a powerful determinant of success. Optimists do better in school, win more elections, make more sales, and succeed more at work than pessimists.

Optimism is related to the way people look at events in their life. When people fail, they try to understand why they failed. Pessimistic people believe that they fail because of an enduring defect in their personality. They think that their failure reflects a pervasive and stable deficit with their abilities. For example, on a particularly rough trading day, they take things personally. They may think, "Other people can trade on a day like today, but I'm so untalented that I'm stuck. It's hopeless. I'll never be able to make it as a trader." But when you feel beaten down, it's vital that you raise your spirits.

In "The Mentally Tough Online Trader," Robert Koppel suggests cultivating an optimistic state of mind by repeating specific positive beliefs. When you are feeling down, it's useful to think, "I believe I will be a successful trader. I believe I can achieve excellent results in my trading. I believe each day's performance is fresh." Thinking these positive, uplifting thoughts can help you tackle the markets, and sift through potential market opportunities until you find a viable way to make a profit.

If you want to succeed as a trader, cultivating an optimistic thinking style is crucial. You'll face a lot more losers than winners as a trader, and it will take persistence in the face of defeat to keep going until you hit upon a series of winning trades. It's easy to get discouraged and feel your opportunities are limited. An optimistic attitude, however, can help you close the gap between your limited expectations and abundant market opportunities.