Dear friends and colleagues,
Early Tuesday morning in the US, stocks looked poised to stage a “Turnaround Tuesday” rally as tariff negotiation hopes ran high. By the end of trading on Wall Street, those hopes had been dashed.
And sure, the market has “crashed,” as people have been saying in the media and on television — but in reality the average price-to-earnings ratio of the S&P 500 right now, 25.1x, is still about 40% higher than the historical average of 16.1x. That’s not the historical low — it’s the historical average.
Over the last few days, I’ve been part of an extraordinarily small contingency of people not freaking out and losing their minds over President Trump’s new tariff plan or the ensuing stock market pullback.
As a financial trader, while mastering technical analysis and market knowledge is vital, neglecting psychological factors is a critical error. Surprisingly, mindset and risk management often outweigh chart patterns and news.
Beginners and veterans alike can expertly spot market direction yet sabotage profits through fear, greed, and undisciplined risk control. Disappointing or disastrous outcomes frequently stem from psychological biases overriding sound strategy.
What truly separates winning traders? It’s not just strategy, but a steely grip on risk and unwavering psychological control.
Successful traders pre-define stop-losses, rigorously manage risk on every trade, and cut losses decisively. They also have the discipline to take profits at the right time, adhering to a well-defined plan and resisting impulsive deviations when a strategy temporarily falters.
They master their emotions, banishing FOMO and revenge trading, while maintaining objectivity through awareness of bias and consistent journaling. Recognising the market’s indifference fuels their rational mindset.
Stop obsessively watching every tick. Understand probabilities, not guarantees. Risk management isn’t just a tool; it’s your emotional shield.
In November last year, The European published an article where I interviewed Chris Beauchamp, the Chief Market Analyst at IG Group, about trading psychology and the strategies he uses to stay steady and make smarter, emotion-free decisions. How the fast-paced nature of the markets can create intense pressure, and learning to deal with strong emotions isn’t always easy.
Master the Market with the “Flow-state”
For millennia, practitioners of Eastern religions such as Hinduism, Buddhism, and Taoism have recognised the importance of the “flow state” and the discipline of overcoming ego as a central feature of spiritual development.
At a different level flow is one of the main reasons that people play video games. The primary goal of games is to create entertainment through intrinsic motivation, which is related to flow. Which means that without intrinsic motivation it is virtually impossible to establish flow.
Developers of computer software reference getting into a flow state as being “wired in”. Stock market operators often use the term “in the pipe” to describe the psychological state of flow when trading during high volume days and market corrections.
Professional poker players use the term “playing the A-game” when referring to the state of highest concentration and strategical awareness. When I catch up with my poker clients after a tournament my first question is usually, “How is your game?” The reply is often “to be honest I played my B-game today.” So the rest of the conversation is governed by identifying what it will take to move to their A-game.
That “in the zone” feeling in trading – clarity, effortless decisions, the market flowing your way – it’s real, and it’s powerful.
But chasing that fleeting high is a fool’s errand. Trading, like any performance discipline, has its off days, its losing streaks. The true mark of a successful trader isn’t perpetual euphoria, but the disciplined resilience to navigate the inevitable dips.
It’s about sticking to your plan, managing risk ruthlessly, and mastering your emotions when the zone feels a million miles away. Don’t chase the feeling; cultivate the discipline.
Ready to build a consistently profitable approach, regardless of your mental state? Join my new 28-day Mindset Coaching for Trading Program. Signing up is easy, simply reply to this email and stop the losses now. Let’s build a resilient strategy together. Message me to take decisive action on your trading future.
Taking the right action is the key to cultivating a life of harmony, compassion and success. Taking the right action encourages actions that align with ethical principles promoting Harmony and well-being for ourselves and others. It involves directing our minds away from things like greed, hatred, delusion, and fostering instead kindness compassion and understanding.
Be limitless,
Doc Steve
