Updated: Oct 22
Trading in the financial markets is a lucrative business. There have been some fantastic success stories and several others that show us the red flags.
We will see what differentiates the Pro traders from the rest of the trading community as we read through the book.
This book dwells on a trader’s mindset that differentiates him from others. There are some interesting interviews with eminent traders towards the end of the book.
Trading Myths Busted Early
You're mistaken if you thought that trading is all about studying indicators and technical analysis.
Trading is about the mindset and how consistent we are with our trading decisions that make all the difference. Professional traders and successful know how important trading psychology is.
They realize the fact that it is about You v/s You and not you and the markets. Sadly, most traders don’t realize this, which results in their trading goals taking longer to achieve or never.
What differentiates Professional traders from the rest of the crowd?
The two most important things that differentiate successful traders from the rest are that they have identified who they are and have worked on their trading psychology.
They have identified the person they are and understand their capabilities and risk appetite. They also believe in consistency, which has a lot to do with the mind and how you train it.
Trading psychology is 80% of your trading and how well you train your mind to trade emotionlessly.
What is the first step?
Trading is all about you and how well you perform in a dynamic environment that keeps changing. Trading is all about identifying yourself, the person you are.
The first step to achieving success is to identify the person you are. Harneet talks about the importance of preparation before you go all out in the markets. Traders get fascinated by success stories and the beginner’s luck that does not help in any way.
Harneet talks about how lucrative the trading business looks from the outside and how hard it till you get started. Harneet talks about the importance of first identifying yourself as a trader, even if you have been successful in other professions or businesses.
It is important to know who you are, how you process information, react to things, and how much you have emotions in control. The moment you start identifying the type of person you are and realize your capabilities, you begin to do better than you were earlier.
He also talks about how “Greed,” “Fear,” “Anger,” and “Ego” affect your trading decisions. He stresses the importance of psychology and why it is important to control emotions like fear and greed.
Should we stress preparation rather than the trade?
In the chapter “Do we have a pro trader’s mindset,” he stresses the importance of preparation rather than the actual act of trading. He lets readers dwell on preparation and why it is more important than the real act.
Some simple steps to follow here are:
Writing down the plan before trading: He talks about how writing a plan down before the trade helps avoid emotions that can dictate terms instead of you simply following the plan.
Too much information: There was hardly any information that you could rely on earlier. However, nowadays, you have so much information available in the information age that it becomes difficult to choose what’s best for you. He talks about the importance of focusing on the study you have done to trade rather than relying on business news and social media.
Probability game: You will see how easily getting over-excited about winners and worked up on losing trades impact our minds. Trading is a probability game, and Harneet talks about minimizing the importance of one particular trade can help you be at ease.
Where do we start?
Process: Harneet talks about the best place to start to focus on the process and follow it diligently. As trading is a probability game, you are rewarded randomly, so you must keep doing the right things daily.
A straightforward yet compelling narrative of three monkeys and how we can relate it to trading is given in the chapter “Three monkeys.” We can see how a different rewarding system can work on your mind to do the same task and how we can apply this mindset in trading. The more you focus on following the process without looking forward to the reward, the more you will see better results.
Rational decision-making: Success in trading is all about making the right decisions at the right time. It is about making logical, rational, emotionless decisions where common sense prevails.
We can see in the chapter “The 3 salesmen” how well we make rational decisions in the outside world and become irrational when it comes to stock markets. One could relate to the narrative given in this chapter to the experiences we might have had of our own if we had traded or invested earlier.
Trading journal: Harneet talks about the importance of a trading journal and how it can help you with your trading decisions. Your trading journal contains immense knowledge about you, your decisions, and how well you reacted to situations.
Success in trading comes from the fact of how well you have identified the person in you. A trading journal helps identify the following.
Track the progress of trading.
Highlights winners and losers.
Calls out strengths and weaknesses.
We look at the importance of a journal and some simple steps to prepare a journal in the chapter “Trading journal.”
What is the best investment you can make?
You can make the best investment in yourself and embrace continuous learning. He talks about reading books and investing in yourself to be a better trader.
He includes interviews with eminent traders about the problems they faced in the initial days and how they overcame them. I’m sure readers will be able to relate to most of the situations, and the experiences these traders share are invaluable knowledge.
The knowledge shared by these traders with examples is priceless.
Trading is all about how well you train your mind to act/react and put your emotions to sleep while you trade. The book “Trade like a Monk”