Good morning, tradersโฆ
Ben here.
To achieve long-term success as a trader, you need to know what drives you to do itโฆ
If your motivation to trade is a โwant,โ it might mean youโre curious about the markets, excited to learn a new skill, or interested in exploring financial freedom.
You enjoy the process of learning, practicing, and improving your trading abilities. Youโre not in a hurry, willing to invest time in gaining knowledge and becoming a better trader.
This is a positive approach because there’s less pressure on every trade. You can make mistakes, learn from them, and slowly improveโฆ
But if your motivation is a โneed,โ your mindset changesโฆ
Maybe you feel the need to make money quickly to pay off bills, support your family, or get a head start on your retirement.
But this is a recipe for disaster. Trading is already stressful enough, but by making it a need, it can become an emotional nightmare.
Suddenly, you’re not just learning a new skill or investing in your future โ youโre desperately relying on every trade to go your way to solve immediate financial problems.
This is a negative approach because the stakes feel much higher, and with that comes fear and anxietyโฆ
Ask yourself: Why do you trade? Is your desire based on something you want to do, or is it something you need to do?
This difference is more significant than you might think, and understanding your motivation can directly impact your performance as an options traderโฆ
Today, Iโll show you the crucial difference between wanting to trade and needing to tradeโฆ
Want vs. Need: Whatโs the Difference?
To help illustrate the difference, letโs use an example everyone can understand: mowing the lawnโฆ
Most of us cut the grass because we want a nice yard, take pride in the appearance of our home, and donโt want our neighbors to complain.
But mowing the lawn isnโt a need โ you donโt need a well-manicured yard to survive. It’s a wantโฆ
Now, letโs switch gears to trading. The best traders approach it with the mindset that itโs a wantโฆ
Thereโs no desperation involved โ theyโre patient, disciplined, and focused on long-term success. They can quickly bounce back from losses because theyโre focused on the process, not their immediate results.
Unsurprisingly, these are the traders that succeed in the long term. However, if trading is driven by a need, the mindset changes for the worseโฆ
The Problems of Trading with a Need Mindset
Trading with a need mindset is extremely dangerousโฆ
When you’re under pressure to make money, youโre more likely to make emotional (and incorrect) decisions.
Youโll ignore the trading strategies youโve learned, overlook your risk management rules, and take on too much risk in an effort to meet your financial goals.
The fear of losing and the desire for quick gains can lead to irrational decision-making. And as any experienced trader will tell you, emotions and trading donโt mix well.
For example, if youโve studied how to manage your trades carefully, you know that placing stop losses near key support levels is critical.
But now youโre in a position where you need to make moneyโฆ
And when every trade feels like it could make or break your finances, fear and panic start driving your decisions.
Suddenly, you might be tempted to remove your stop loss because youโre hoping that the market will turn in your favor.
Or you might take on a bigger position than usual because you’re hoping to hit a grand slam.
These actions go against everything Iโve taught you. But in the moment, they might feel necessary because you’re focused on meeting that financial need.
Trading out of need also amplifies the impact of losses. When you trade with a want mindset, a loss is disappointing, but itโs part of the process. You learn from it and move on.
But when you trade with a need mindset, a loss feels devastating. It can shake your confidence, increase your desperation, and lead to more impulsive decisions.
Instead of learning and improving, you might find yourself stuck in a cycle of emotional revenge trading, doing anything to recover from lossesโฆ
Now that we’ve explored the dangers of trading with a need mindset, let’s look at ways to avoid itโฆ
How to Avoid the Need Mindset
- Set Realistic Goals
- Approach trading as a long-term skill-building process, not a get-rich-quick scheme.
- Set achievable financial goals on a realistic timeline, and donโt be discouraged if you donโt hit your goals perfectly.
- Trade with Capital You Can Afford to Lose
- Only risk money youโre willing to lose, so financial pressure doesn’t drive decisions.
- Avoid trading with money meant for essential living expenses.
- Understand that losses are an unavoidable part of trading. Make peace with the feeling of losing money.
- Develop (and Stick to) a Trading Plan
- Create a detailed trading plan (with defined entry, exit, price target, and stop loss) before putting any trades on.
- Follow your plan consistently, even when those pesky emotions urge you to deviate.
- Manage Risk Appropriately
- Use stop losses to protect your trades.
- Scale out of your winning positions gradually to lock up your gains.
- Position size carefully so that a single trade doesn’t have the potential to significantly impact your account.
- Choose strike prices and expiration dates that fit your risk management plans.
Today, take a moment to ask yourself: Is trading something you want to do, or something you need to do?
Be honest. If it’s a need in your mind, recognize the pressure that can bring and how it might affect your decision-making.
Then, work to change your mindset and make trading a โwant.โ
Trading is a lifelong journey, and understanding your motivation is the first step towards achieving your ultimate goals.
Before we go, letโs look at:
๐ฐThe Biggest Smart-Money Bets of the Day๐ฐ
- $6.5 million bullish bet on JD 12/20/2024 $20 calls @ $7.36 avg. (seen on 9/18)
- $4.7 million bearish bet on XLF 01/17/2025 $43 puts @ $0.90 avg. (seen on 9/18)
- $4.7 million bullish bet on XLB 10/18/2024 $93 calls @ $1.90 avg. (seen on 9/18)
Happy trading,
Ben Sturgill
P.S. If you want to stop making โearnings guessesโ and start bagging earnings winnersโฆ
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