The four most important things you must understand to achieve the best mental state as a trader 🧵
These four understandings will guide you, like a map, towards building the best mental state as a trader.
Follow this path to success in trading↓
Thread 1/7
These four understandings will guide you, like a map, towards building the best mental state as a trader.
Follow this path to success in trading↓
Thread 1/7
2/7
To succeed as a trader, consistency is crucial, but what hinders that consistency is "emotion."
These emotions are born from your thought processes and beliefs, which stem from "how you understand trading."
Here are four things you need to understand to build the best mental state as a trader.
To succeed as a trader, consistency is crucial, but what hinders that consistency is "emotion."
These emotions are born from your thought processes and beliefs, which stem from "how you understand trading."
Here are four things you need to understand to build the best mental state as a trader.
3/7
① Understanding the role of a trader:
The trader's job is to create a system with an edge, repeat it consistently, and allow the law of large numbers to work through a large sample size under the same conditions, thereby drawing out the edge of the system.
To extract the edge of the system, you must function continuously and precisely as part of the system.
All outcomes that occur following the rules are part of the system that forms the edge.
Your only responsibility is how strictly you follow the rules, and nothing beyond that.
You must follow the rules, and you are not responsible for the results.
① Understanding the role of a trader:
The trader's job is to create a system with an edge, repeat it consistently, and allow the law of large numbers to work through a large sample size under the same conditions, thereby drawing out the edge of the system.
To extract the edge of the system, you must function continuously and precisely as part of the system.
All outcomes that occur following the rules are part of the system that forms the edge.
Your only responsibility is how strictly you follow the rules, and nothing beyond that.
You must follow the rules, and you are not responsible for the results.
4/7
② Understanding and trusting the system:
Through thorough backtesting and practice on a large sample size, you create a system with an edge and build unwavering confidence in that system.
Without trust in the system and its large-sample-size statistics, it will be difficult to continue following the system’s rules in tough situations.
If consistency is lost in your trading, you will not be able to converge probabilities, and the edge will not be drawn out.
When you fully understand the system’s performance through large sample sizes, you can anticipate potential drawdowns or losing streaks in advance, and it becomes possible to operate with peace of mind over the long term by using position sizes with a 0% risk of ruin to fully leverage the system.
Most importantly, you must "experience" this system data, not just "know" it.
Knowledge will not change your beliefs, but experience can.
There is nothing more convincing to you than experience.
That's why thorough practice through backtesting software is essential.
Data can be purchased, but practice cannot be skipped.
② Understanding and trusting the system:
Through thorough backtesting and practice on a large sample size, you create a system with an edge and build unwavering confidence in that system.
Without trust in the system and its large-sample-size statistics, it will be difficult to continue following the system’s rules in tough situations.
If consistency is lost in your trading, you will not be able to converge probabilities, and the edge will not be drawn out.
When you fully understand the system’s performance through large sample sizes, you can anticipate potential drawdowns or losing streaks in advance, and it becomes possible to operate with peace of mind over the long term by using position sizes with a 0% risk of ruin to fully leverage the system.
Most importantly, you must "experience" this system data, not just "know" it.
Knowledge will not change your beliefs, but experience can.
There is nothing more convincing to you than experience.
That's why thorough practice through backtesting software is essential.
Data can be purchased, but practice cannot be skipped.
5/7
③ Understanding and embodying probabilistic thinking:
By understanding probabilistic thinking, you will comprehend how to gain certainty in an uncertain world and how to apply it to trading, making your job clearer.
By embodying these thoughts through your actions, you replace incorrect thought processes and beliefs that place value on "winning or losing in the moment."
If you don't stop actions and habits born from the belief in the value of winning or losing—such as constantly monitoring P&L during trades, worrying about monetary amounts, staring at charts for no reason, or getting angry after losses—you will never fully acquire probabilistic thinking.
These beliefs contradict probability.
Beliefs create actions, and actions reinforce beliefs, forming a feedback loop, so you must eliminate bad habits and thoughts and replace them with new ones.
At this point, the belief to replace them with is probabilistic thinking, which must be tied to action.
③ Understanding and embodying probabilistic thinking:
By understanding probabilistic thinking, you will comprehend how to gain certainty in an uncertain world and how to apply it to trading, making your job clearer.
By embodying these thoughts through your actions, you replace incorrect thought processes and beliefs that place value on "winning or losing in the moment."
If you don't stop actions and habits born from the belief in the value of winning or losing—such as constantly monitoring P&L during trades, worrying about monetary amounts, staring at charts for no reason, or getting angry after losses—you will never fully acquire probabilistic thinking.
These beliefs contradict probability.
Beliefs create actions, and actions reinforce beliefs, forming a feedback loop, so you must eliminate bad habits and thoughts and replace them with new ones.
At this point, the belief to replace them with is probabilistic thinking, which must be tied to action.
6/7
④ Understanding how probability works:
Probability works much slower than you think.
Through understanding how probability works, realize that an edge will not appear within the focal distance that humans perceive.
As I’ve mentioned in previous threads, even with the best system, about 30 trials may still be caught up in randomness and not yield much.
Without understanding the nature of probability, you might make misguided "improvements" with good intentions, or even make the mistake of changing the system itself, thereby preventing the extraction of the edge.
④ Understanding how probability works:
Probability works much slower than you think.
Through understanding how probability works, realize that an edge will not appear within the focal distance that humans perceive.
As I’ve mentioned in previous threads, even with the best system, about 30 trials may still be caught up in randomness and not yield much.
Without understanding the nature of probability, you might make misguided "improvements" with good intentions, or even make the mistake of changing the system itself, thereby preventing the extraction of the edge.
7/7
While this is a simple explanation, if you can build these understandings within yourself "as a unified whole without contradiction," you will naturally lose interest in immediate wins and losses.
That will no longer be within the scope of your responsibility, and you will have a clear, overarching view of what actions you are taking and at what time scales they are functioning.
Your focus will shift to the sample size, which aligns with the interests of a casino owner.
This time scale is far longer than the concern over immediate wins and losses.
If we focus too much on what’s in front of us, we will be placing ourselves in the time scale of randomness, always feeling anxious and miserable.
In an attempt to relieve that misery, we may try to "improve" based on results influenced by randomness, leading us into an endless loop.
However, by shifting our focus to the collection of sample sizes, we can place ourselves in the time scale where probability works.
You will focus solely on the process, and as you continue trading daily as part of your schedule, you'll soon find that several months have passed, and probability is functioning properly.
Trading on this time scale will free you from much of the pain associated with trading.
And since it is so important, I’ve repeated it several times, but knowing all of this as knowledge is meaningless.
The ultimate form of understanding is action.
You must understand this perfectly through action, and you must embody it through action.
These four understandings are the path to consistency that I have pursued for over 16 years in my trading experience and are the path a trader should follow.
If you enjoyed this thread, please support by giving it a repost 🔁
I explain these concepts in detail in my book, so if you haven't read it yet, please do.
Link to my book ↓
Your support is what motivates me to post every day.
Thank you😊a.co/d/3i4MC0H
While this is a simple explanation, if you can build these understandings within yourself "as a unified whole without contradiction," you will naturally lose interest in immediate wins and losses.
That will no longer be within the scope of your responsibility, and you will have a clear, overarching view of what actions you are taking and at what time scales they are functioning.
Your focus will shift to the sample size, which aligns with the interests of a casino owner.
This time scale is far longer than the concern over immediate wins and losses.
If we focus too much on what’s in front of us, we will be placing ourselves in the time scale of randomness, always feeling anxious and miserable.
In an attempt to relieve that misery, we may try to "improve" based on results influenced by randomness, leading us into an endless loop.
However, by shifting our focus to the collection of sample sizes, we can place ourselves in the time scale where probability works.
You will focus solely on the process, and as you continue trading daily as part of your schedule, you'll soon find that several months have passed, and probability is functioning properly.
Trading on this time scale will free you from much of the pain associated with trading.
And since it is so important, I’ve repeated it several times, but knowing all of this as knowledge is meaningless.
The ultimate form of understanding is action.
You must understand this perfectly through action, and you must embody it through action.
These four understandings are the path to consistency that I have pursued for over 16 years in my trading experience and are the path a trader should follow.
If you enjoyed this thread, please support by giving it a repost 🔁
I explain these concepts in detail in my book, so if you haven't read it yet, please do.
Link to my book ↓
Your support is what motivates me to post every day.
Thank you😊a.co/d/3i4MC0H
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