One of the most harmful actions traders can take is to live in the past and to constantly re-live negative trading experiences. In this article, I’m going to give you a simple mental exercise to help you focus forward and eliminate the past.
Our analogy begins as if you are driving a car. As the driver of that car, you have two options. One option is to waste your time looking in the rear view mirror at the accidents littering the landscape behind you. The other option is to focus forward, so you can avoid the next potential accident and have a clear view of the financial road ahead.
Those who spend their time looking in the rear view mirror may only see their trading mistakes. Lets define trading mistakes as: trades that you make when you should stand aside, losing trades where you exposed yourself to too much risk, profitable trades you failed to execute, holding losing trades in hopes of recovering the loss.
Too often, traders focus on those mistakes. Because they are constantly looking behind them at what has already occurred, they miss the opportunities that are in front of them and increase the odds of running into the next trading mistake. Furthermore, the longer they spend staring into the rear view mirror, the more likely they are to repeat the mistakes of the past and the less likely they become to take advantage of an opportunity, because they are frozen by fear of repeating their past failures.
We invite you to rip out the rear view mirror. In fact, we demand it. The only way to successfully trade is to see all of the opportunities on the road ahead. There are NO opportunities behind you. Even a missed opportunity is gone once it is in the rear view mirror. Successful traders focus forward on the opportunities ahead of them and to avoid trading obstacles.
Regardless of whether the trade is profitable or not, learn from it as it happens, treat the trade as a single event and move on. Do not dwell on or become emotionally involved in the outcome of your trades. Instead, look ahead to the next trading opportunity.
Your goal as a trader is to find the next trading opportunity, and act on it. So rip out the rear view mirror and determine what you want your financial destination to be. Focus forward and you will find it easier to reach. Only by looking ahead can you eliminate fear of failure and free yourself to take advantage of every trading opportunity.