Five steps to mental strength

A reader sent me a question this week on how to develop mental toughness in discretionary trading, noting that his own toughness seemed to be getting less tough as he went through the learning process. I thought it was a good question, and I spent a whole podcast answering it. If you want the full answer, go check out the podcast, but I think this is an important enough topic that some highlights are in order.

Mental strength or toughness basically means that you are able to do what you need to do, no matter how hard it is. The emotional stresses of trading, and particularly of learning to trade, are extreme. Mental strength doesn’t mean that we are immune to those emotions; it means that we are able to do the right thing no matter how uncomfortable we are.

strong armOne of the answers to developing mental strength you are not going to like: part of the answer is time. The more time you spend trading, the more times you have the experience of putting on risk in the markets–most people experience the emotional charge getting weaker over time, so that’s often part of the answer. But how can we make sure that process happens in the best way, and how can we keep it from going wrong? Here are some ideas for developing mental strength and toughness in trading:

  1. Refine your expectations. This is a theme I’ve beaten to death in many blog posts, in my book, and in a number of podcasts, but one of the biggest reasons traders struggle is that they have unrealistic expectations. You are learning to do something difficult, and it will likely take you several years to learn to do it. Once you’ve learned to do it, it will probably take you a decade to reach true expertise. Past that, we’re always learning. Also, results have a wide range of outcomes because of how probability works. Having realistic expectations can help you weather the emotional stresses of the learning curve.
  2. Embrace uncertainty. You don’t have a choice on this one. Your P&L will go through good times and bad times. Some of that will be due to performance issues, but some of it is just going to be random fluctuation. Work to understand the practical implications of probability and statistics. That’s not as easy as understanding some equations or knowing what a probability distribution looks like. Get comfortable, deep down in your bones, with uncertainty and the range of possible outcomes. You might argue that if we truly understand these topics we will never be comfortable, and I suppose there’s some truth in that. In that case, get comfortable being uncomfortable.
  3. Understand your emotional makeup. There’s not a whole lot I can do about this one in a paragraph, but the process of learning about you and your relationship to risk is a big part of the learning curve. What sets you off? What are your emotional triggers? What can cause your attention to flag? You’ve heard the injunction “know thyself”; if you don’t know yourself, the market is a very expensive teacher.
  4. Make sure you have an edge. Again, you’d think this one is obvious, but it’s not. Too many traders struggle for too long simply doing something that does not work. There is maybe not enough emphasis on finding a true edge in much of the traditional literature. Too many traders thing that “basically, anything works”, but I’d suggest to you maybe the opposite is true. Maybe it’s very, very hard to find an edge. Maybe it’s even harder to apply that edge, and maybe it’s even more difficult to maintain it over a long period of time. If you don’t have an edge (or get one), none of this other stuff is going to work.
  5. Love the markets, the process, and yourself. Yes, I realize this one is a little softer than the others, but I think it’s critical. If you don’t love this, you won’t be very good at it. If markets are not your passion, go find your passion wherever it is. But you also have to be able to detach your sense of self worth from your results (because of #2), and you must have motivation that goes beyond the markets.

These are not quick-fix bullet points, and they are not the final answer. Some of you may have different opinions and experiences. (If so, please share them in the comments.) But I think these points give us a good direction and can point toward the mental strength that is needed for enduring success in the markets.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 6 Comments

  1. Sean Quinn

    Man, there is a lot of great information here distilled to the point. Adam, honestly I think you could do separate blog posts on each of these points. I myself can comment of all of these but I’ll just comment on the one that has Most recently, the one thing that has changed my view is refining my expectations. I was a successful prop trader in equities for a number of years, hit a wall, had to go back to get a fulltime job. I’ve been trading futures (ES) for almost 2 years now (on & off), and I consider myself a breakeven trader. And while I have almost given up multiple times, it was because of the frustration of my own expectations, of what from the outside seems like I am going nowhere. It was only refining my expectations, from reading some of your material Adam, that I saw that surviving the game while continuing to learn is a big step. Obviously I want to do more than just survive, but I am accepting of where I am at in my development. That in itself is huge for me. I used to continually battle the fear of missing out when I was trading fulltime. Now, I am very grateful for the time I have to trade (maybe 1-2 hours in the morning). I can feel small changes happening below the surface, if that makes any sense. Confidence slowly grows when I make decisions and take the right (often hard) actions, like walking away when I know I am in a triggered/emotionally comprised state. Anyways, just wanted to comment on this great post.

    1. Adam Grimes

      Thank you. I made a note to think about doing separate posts on each of these points… Truly, I don’t think they are necessarily set in stone, so maybe it’s a matter of just fleshing out the ideas… maybe it should go into the trading course.

      I’ll give it some thought and will do more with it soon!

      Thank you for your insightful comment that very much adds to my post.

  2. dan taverner

    Excellent post Adam. For me, the most important part is “know thyself..” or self awareness. It has been a long haul to get to the break even stage, and I only turned the corner when I started to work on self awareness through your original posts on mindfulness. Having spent years wrestling with self discipline and emotional control,it really has been a eureka moment. Somewhere along the line, a trader has to find a degree of detachment or self awareness that allows them to interrupt the emotional reaction loop..and learn to wait for the trade to come. To be able to stand aside and “watch yourself”, and in the heat of the moment, analyse your thoughts before you act. That is the mental toughness I am aiming for. Its almost as if there is a committee in your head. you have to teach the upstarts to respect the chairman!

    1. Adam Grimes

      I like the committee idea, or I often think that I have a very stubborn, lazy, and not very smart 6 year old child in my head. If Ithink like that it helps to apply the right discipline and also reminds me to be very, very clear with myself (because the child is not going to figure it out for himself!)

      It’s certainly an ongoing process, but the rewards are certainly worth it.

      1. dan taverner

        I am reminded of your post “the hero’s journey”
        To quote you….

        “See? Trading is not truly about learning patterns. It is not about learning some math. It is not about skill development, and it is not even about risk management. All of these things are important, but the real work of trading is work on ourselves.

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