Quick Tip: Measure them, plan for them, and reduce size when they last longer than average.

Every trader, professional or retail, experiences drawdowns, the period of more losing than winning trades sending your equity curve trending lower.

Don’t be surprised, they’re as normal as changes in volatility and trend on your price charts (although not as frequent!). Yet most traders treat drawdowns like personal failure rather than what they truly are: a common occurrence in a probabilistic business.

The best traders I know don’t fear drawdowns, they respect them. That respect keeps them in the game long after traders with bigger egos and weaker discipline get washed out.

What hurts the inexperienced trader is what they’re likely to do next…

1. Doubling size to “make it back fast”
2. Abandoning what works
3. Overtrading
4. Revenge trading
5. Predicting instead of following valid signals.

These reactions stack emotional risk on top of financial risk. A drawdown shouldn’t break your account. I...

One of the quietest confidence-killers in trading, especially for retail traders, is something most people don’t even realize they’re doing: narrative thinking.

Narrative thinking happens when you start telling yourself a story about what the market should do.

• “It should bounce from here.”
• “It should fill the gap.”
• “It should go back to fair value.”
• “The Fed said X, so the market should do Y.”

In my trading career I’ve lost too many times by building stories instead of following signals. You may be falling into the same trap.

The market doesn’t care about what seems logical. It doesn’t care what feels deserved, fair, or reasonable. It moves on order flow and price—nothing else.

Narratives make you feel informed, prepared, even superior. They give you the illusion of knowing something. But there’s a problem: When you believe a story, you might:

• increase size
• widen stops
• hold losing trades longer
• ignore signals that conflict with “your view”
• convince yourself the marke
...

Every trader—new, seasoned, retail, or professional—eventually hits a stretch where confidence takes a punch. A few losing trades. A missed signal. A moment where emotion slipped into the driver’s seat. Suddenly the same market that once felt familiar and navigable now feels like enemy territory.

In my 26 years trading and 17 years teaching new traders, I saw this cycle play out many times. The myth most traders believe is that confidence comes roaring back after one great trade—the home run, the monster win, the “I still got it” moment.

But that’s not how real confidence works.

I’ve found that confidence returns in small, steady steps. One clean execution at a time.

After a setback, you might be tempted to swing for the fences. You’ll try to make back losses quickly. This creates a dangerous cocktail of oversized risk, sloppy entries, and emotionally charged decisions.

Pros recover confidence in the way athletes rehab an injury: carefully, methodically, without ego. When confiden...

Successful trading isn’t just about strategy—it’s about mindset. One powerful psychological tool you can use is mental contrasting —a process that helps balance optimism with pragmatism.  

In trading, mental contrasting means setting clear, ambitious goals while also anticipating challenges and planning for them. This approach keeps you focused, disciplined, and prepared for inevitable setbacks.  

Mental contrasting involves two key steps:  

1. Visualizing Success (Optimism) – Set specific, ambitious, and realistic trading goals. This could be something like: “I will grow my trading account by 20% this month” or “I will stick to my trading plan without emotional decision-making.”  

2. Identifying Roadblocks (Pragmatism) – Instead of assuming success will come easily, think about potential obstacles and plan how to handle them. Some common challenges include losing streaks, chasing trades (entering late due to FOMO), and technology breakdowns (internet outage, platform glitches). 

The late Dr. Wayne Dyer said, “When you change the way you look at things, the things you look at change.” This is a powerful mindset shift, and it applies to your trading in a big way.

Most new traders approach the market with rigid beliefs from life’s lessons that don’t apply to trading the markets — like fearing losses, wanting to be right all the time, and making decisions without adequate input. But when you change your perspective, you start to see opportunities you were blind to before.

Instead of fearing losses, you start viewing them as part of the game—just the cost of doing business. This allows you to cut losers quickly and let winners run.

Many traders fixate on being right, but when you shift your focus to risk-reward ratios, you start thinking in terms of probabilities, not emotions.

If you’re buying stocks based on looking at one price chart, shifting to a rule-based strategy that explores several time frame charts will change how you see opportunities.

Here’s how ...

Pre-Paying

Before online retailing we went to a brick-and-mortar store. We saw, touched, used and/or fitted the merchandise. Then we decided and paid. Very safe, the sequence of paying afterward. 

I recall the first time I wanted to buy shoes online. It was a hard decision. I wanted to try them on, feel the fit, and not have the hassle of shipping them back for a refund. Eventually I gave in and judging by the growth of online retailing, most everyone did too. 

If you’re comfortable now with buying from an online retailer, you are one step closer to being an unemotional trader. 

Think about trading this way: The price you’re paying to enter a trade is your pre-determined stop loss. That’s the most the trade will cost you. The “merchandise” you’re expecting is the profit target(s). Pay a fixed amount in advance, receive an unknown amount back. 

Imagine you’re writing a check to Mr. Market when you enter your trades. If you have this mindset that the "check" was cashed and out of yo...

Imagine starting in trading without any historical information. No price charts. No patterns to study. No economic information. No annual reports. What would you use to determine if it was time to buy or sell? 

Thankfully, we needn’t dwell on that question at all. We have incredible historical information available that we can research for potential edge in our trading. But the fact is that historical information is not a perfect predictor of the future. We can’t control the market. 

The future we can control is our behavior. The result of every new day, every new trade is mostly controlled by how we behave. Were we disciplined following our rules? Were we emotional about wins and losses? Were we prepared? Were we curious about improvements? 

While we depend on historical data to give us an edge, that edge is only as good as how we act in present time. This brings us to the cornerstone of successful trading: self-mastery. In a world where the market’s movements are beyond your contr...

Traders can learn from so many great sources that have nothing to do with trading. Whenever I’m reading any topic unrelated to trading my thoughts often drift to how I could apply the same information to trading. 

If you think about it, trading is more psychological than mathematical. That means your ability to improve your results rests more on improving your behavior than your strategy rules. 

Here’s a great example: Charles Darwin said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

So true in life and in trading!

Reading this quote, agreeing to it, and then doing nothing to systematically apply this truth to your trading would be a shame. 

Here's a suggestion on how to apply Darwin's observation. My friend and colleague Dr. Woody Johnson, author of Secrets of the Peak Performance Trader, encouraged me years ago to start a “thought journal.” Rather than simply documenting trade results and associated data,...

Trading success is more psychological than mathematical. When I first realized this I was disappointed. I like math and wanted to find my success in formulas, indicators, and statistics. These are all valid tools for finding edge, but that edge won’t translate into positive performance until you get your head right. 

I’m intrigued by the number of biases we might have that hinder our success. Here’s a look at some less obvious biases that interrelate. 

Narrative Fallacy: This occurs when you create or believe in simplistic stories to explain market behaviors, even if the data doesn’t support those stories.

For example, you may believe  a market “story”—such as “Tech stocks always lead the market”—and ignore data that contradicts it. This can lead to biased decision-making, missed opportunities, and unnecessary losses. 

This is an easy one to catch yourself with. Anecdotal stories are obvious!

Here’s the fix: Focus on data. Prioritize quantitative analysis over storytelling. Play D...

Trading Lessons from A Road Less Traveled 

In this 4-part series we'll explore why traders need more than technical analysis and market strategies—they need emotional resilience.

We’ll use ideas from the bestseller A Road Less Traveled by M. Scott Peck, to find ways how traders can achieve mental discipline, personal growth, and manage their emotions for long-term success in the markets. If you missed yesterday's article you can find it here. 

4. Balancing Rationality and Emotion: Emotional Awareness in Trading

"Mental health is an ongoing process of dedication to reality at all costs." – M. Scott Peck

Peck emphasizes the need to face reality with honesty. Traders must acknowledge their emotions without allowing them to dictate actions. Fear, greed, and euphoria are natural, but successful traders recognize these feelings but respond rationally.

Tips:

• Practice Mindfulness: Regularly check in with your emotional state before, during, and after trades. Are you in present time or...