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Gaining Mental Trust For Your Trading

mental trust

I hear from time to time that when beginners start dealing with trading, e.g. with options trading, they ask themselves at the beginning of their journey whether the whole concept of trading works at all. Because what they lack at the beginning is mental trust, which is absolutely necessary to achieve permanent positive results in trading. Of course, you can always convince beginners that trading works. But in the end, we don’t usually believe what others tell us, but when we have our own experience to verify other people’s information in this way.

But gaining trading experience is a little different because this kind of experience can cost money. And especially it does at the beginning, because beginners make a lot of mistakes, making wrong decisions, and they risk far too much or sometimes too little.


The Importance Of A Positive Mental Mindset


For this reason, it is very important that beginners get on a positive path right from the start. That means they need to experience success and be rewarded for trading. Because only if you are rewarded with positive results again and again at the beginning, then a mental belief sets in that trading (no matter what kind of it) actually works.

Thus, let’s take a look at two traders as an example. Two traders with the same starting capital and the same (proved) trading strategy. The only difference is in their mental beliefs. The first one is absolutely convinced of his trading and his success. The other, on the other hand, is very critical and skeptical, saying that trading doesn’t work. Who do you think will be successful even though they both have the same money and strategy? Well, the probability that the first trader will be successful is much higher than that of the second trader.

But please don’t get it wrong: just believing that a trade will work does not automatically mean that it will work in any case. Nevertheless, just by having a positive mental trust (or mental belief if you will), the first trader will see completely different possibilities in the markets. And even on losing trades, he will be able to analyze the trades in a different way. He will recognize what he did wrong and what he can do better on the next trade. In other words, he will always discover something to move forward in its trading.
The second trader, on the other hand, will usually get confirmation that the trading system or trading in general, is not working. But it’s not the system, it’s just his negative mental trust preventing him to move on.


What Is the Problem With the Tips and Tricks for Trading?


Most trading tips and tricks are usually designed to fool ourselves. This is because humans are not made to be successful in the stock market. For our problem is that we have the wrong mindset when we start trading. We also cannot imagine certain things.

A simple example: If you tell someone today that you make a 10% profit on the stock market, most people will just shrug their shoulders. Because 10% sounds like little and most would say that you can certainly earn more elsewhere.

Why is it so? Quite simply because nobody can imagine the effect of compound interest. Nobody can imagine what can become of 10% compound interest within a period of time, and what unbelievable sums of money can arise from it. Our heads are just not made for it. However, what it is made for, and you see that very often these days, is that people are looking for a quick buck. What they want is to make a lot of money in a short period of time, and they are blinded by the few people who have made it through a lucky coincidence.


This Is How You Can Gain Mental Confidence For Trading


Now here comes the trick to gaining mental confidence in your trading. But even this trick is actually of that kind to outwit yourself. But it’s quite helpful for newcomers to gain that confidence they lack in the beginning. And it’s also relatively simple, so at first glance, it doesn’t seem helpful at all because it’s so simple.

mental trust

The solution is: as an (absolute) beginner in options trading, set up trades where the probability that you will suffer little or no loss is extremely high!

Sounds simple and maybe nothing new for you? Are you disappointed now because you might have expected an academic or complicated, secretive approach? Then ask yourself now: have you already thought about it and have you implemented this idea? I already know which answer most people have in mind right now. The answer will be: “No, I didn’t implement it”.

If you’ve already done it, then congratulations, you don’t need mental confidence in your trading anymore because you already have it.

If you haven’t tried this trick yet, I’ll briefly explain how you can make such trades to gain mental trust:


Four Steps Of How To Gain Mental Trust In Trading


1) Choose an underlying that suits your account size. For example, if you have $3.000 available, then you shouldn’t pick an expensive stock, and for sure not a future. If you have $50.000 then you are also welcome to try it with a future contract or with a stock that costs e.g. $60 – $70.

2) Pick a strike that is so far from the current price of the underlying that you would make no money or almost no money. For example, such a strike could net you $0 after fees, or maybe $5-$10. A suitable delta for such options could be in the range of less than or equal to 5, i.e. delta 5, delta 3, or even delta 1. Just search a bit and you will find a suitable underlying.

3) Think of a strategy where you not only make little money but also lose as little money as possible. By picking a far-out-of-the-money strike, you already have a good chance that the trade would develop in your favor. But there is still a residual risk. One way to protect yourself and limit the loss further is, for example, not to sell naked calls or puts, but to set up spreads. This makes sense, especially for expensive stocks or when you want to sell options on futures.

4) Observe what happens. Even if the position should develop negatively, hold it! Don’t close it and don’t adjust it! Because if you followed the instructions, you should have positive results at least in 95% of all your mental trades. And with positivity, I don’t mean earning money, but seeing that your idea worked. And the positions that performed negatively should bring you just a minimal loss.

Even if I repeat myself: this trick is very simple, but it has a great effect. For this exercise causes something positive in you. The reason for this is that you also sell an option in the expectation that it has a certain probability with the trade you have set up. For example, if you trade at Delta 10, you have a theoretical 90% chance that the trade will work. Of course, despite such a high probability, the trade will go against you.

Hence, what we’re doing with this trick is just seeing how it stacks up with probability. That means what comes out at the end of the trade doesn’t matter at all. What is important is that the trade ends up showing you that it will meet the probability that you expect in the end (and in most cases, it will do).
What is the positive effect of this exercise? Financially, it doesn’t bring you anything at all. But if you are a complete beginner and have doubts (and you will have them), after 20-30 trades of this type you will see that the stats are going in your favor. It also doesn’t matter whether you will set up trades with the trend or against the trend. Because of this exercise, the probability of a loss is very low.

But this simple exercise gives you so much mental trust that you can then start trading certain account sizes with a profit. In other words, you will start actually making money trading options!


Final Words


If you have never dealt with options trading, you will not have confidence at first and also doubts. But it’s not your fault because it’s absolutely normal – options trading also has to be learned before you get profitable. And in my experience, you usually don’t come to options trading as a complete beginner, but you have had other experiences before, e.g. in day trading, forex trading, etc.

And usually, those experiences have been negative ones. Because if they were positive, you probably wouldn’t know or wanted to know about options trading if you had success with other trading opportunities. These negative experiences have therefore shaped your mental image.

Therefore, you must first condition yourself positively. And when someone tells you to have faith, it usually has no effect. Because one thing is theory and the other you have to experience for yourself to gain mental trust. With this exercise, you can increase your mental trust enormously. And the best thing about this exercise is that not only will you learn a lot about options and options trading. You’ll also learn a lot about yourself.
For example, you can also write down how these test trades make you feel. Because we are not talking about paper trading here, but trading with real money. And if it’s just $10, it’s always different when it comes to trading with real money. But this is actually enough to get to condition you positively.
And if you’ve already taken your first steps in options trading and haven’t had success, just try this simple trick. I can assure you that you will be able to gain mental strength through this. And this one will take you to a whole different level in options trading.


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