Rock Solid Confidence
Winning traders have a deep sense of confidence. After having experienced a variety of market conditions, they know that they can handle almost anything. They aren't arrogant. They don't unrealistically think that they can do the impossible. Due to their extensive experience, they have developed a sense of rock solid confidence.
Self-confidence doesn't come naturally for everyone. Some people have low self-esteem. They are prone to self-doubt. Their self-esteem wavers. When they've tried a new activity, they have often failed. And they carry this failure and low self-esteem with them throughout their lives. Naturally, it impacts their ability to learn how to trade. One way that people with low self-esteem cope with the pressure of having to face the challenge of the markets is to pretend that trading is easier than it really is. They falsely believe they have abilities that they just don't have. They conceal their inadequacies rather than face them. There's a consequence for having a false sense of confidence: They tend to feel extreme emotions when they fail. Each failure dramatically contradicts their unrealistic view of themselves, and they react defensively with anger and frustration.
A study by psychologists Rhodewalt and Morf (1998) illustrates how the view you have of yourself can influence your emotions. Participants either had an accurate view of themselves or an exaggerated false view. The view they held of themselves was correlated with how they handled failure. People who held an exaggerated view of themselves responded with extreme anger, frustration, and disappointment when they failed compared to people with an accurate view of themselves. They were especially emotional when failure followed success. People with an inaccurate view of themselves changed their self-view radically when a failure followed a success. Whereas they thought highly of themselves after a success, they felt completely devastated after a failure. This study shows how individuals with chronically low self-esteem, who disguise their low self-esteem by falsely building themselves up, are vulnerable to extreme changes in mood and feelings of self-worth. These dynamic, defensive coping processes can hamper trading, where failures often follow successes. When this happens, the person with chronically low self-esteem can rapidly shift from feeling invincible after a win to feeling extreme despair and hopelessness after a loss. Emotional ups and downs do not help trading.
Winning traders hold an accurate view of their abilities. They don't build up their ego by pretending they can do more than they can. Don't be afraid to admit your limitations. No one is perfect. The more honest you can be about your abilities as a trader, the more likely you'll be willing to hone your abilities until you gain the experience you need to have a rock solid sense of confidence.