The Cycle of Confidence in Trading (and Life)

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I have had one of those weeks…

For two and a half months now I have been on a tear. Markets have looked easy day after day. Trades worked. Money made. Happy Shonn.

Then something happened. I made a mistake last Friday. I lost a portion of last weeks earnings on a trade that I made two mistakes on. I had a chance to get out with profit at two points and I didn’t follow the rules exactly… I made a mistake. It’s human. It’s going to happen. I didn’t blow up an account. I still made money for the week.

But I be damned if it didn’t take something more important and infinitely more valuable. It had tried to steal my confidence. And as I process this today, I needed to write it down.

I put the “cycle of confidence” up above. I did a google search to see if that was a real thing even and bada bing it popped up a whole bunch of these kinds of things. I like this one. It makes sense to me. I think that because confidence is at the top, whomever created this believes that confidence is the basic element of all success. I firmly believe that whole heartedly.

Sometimes we lose perspective on that though. I did this week. I got my dial off one notch and unfortunately one notch is enough to put a pro golfer or a trader or any other high level performer dizzy in the corner wondering what the hell changed from this week to last.

What do I mean by off a notch? Take the pic above and rotate it clockwise one notch. What’s at the top?


If success is the basis of your confidence, you will never have it. It’s not the origination point, it’s the product.

When success is at the top of the chain, it’s so dangerous because that means that confidence can be stolen. It can be taken. Success is fleeting, ESPECIALLY in trading. We will have bad days. We will have bad weeks. I work so hard to avoid them. I really do. But they catch up with me every once in a while and to be totally honest here, I don’t deal with them well.

This is the next evolution of my trading walk.

Take my confidence out of my performance and my success and put the dial back in the correct position.

If I can do that, then a losing day, week, month, whatever, will never be able to touch me again. I know I can do this, I do it every day for months, and then one hiccup. I’m sure you have those feelings too. But when the money reads flat to slightly negative for the week, it’s a time when the enemy of your soul and life can get a foothold and that needs to be fought with every ounce of effort I have.

Excellent trading results don’t come from the charts or my knowledge of price. They come from a belief that I can do this, regardless of what the P&L says. The P&L is a product of your confidence. My off weeks are a product of my mental game, not my knowledge or my skills.

I think the greatest example of this is Tiger Woods. That cat is no different today than he was when he was dominating the game of golf. His body is the same. His clubs are the same. The course didn’t change. The game didn’t change.

His mind changed. He lost the edge and can’t find it.

As traders, we can not allow this to happen. I can not allow this to happen. Otherwise, it’s time for me to go get a job at Home Depot.

Develop your confidence. Here are three things I do to pull myself out of these slumps, because they come along every so often.

  1. Remember who you are. You are not the product of your successes or failures. You’re much more than a successful trader or unsuccessful trader. This is your job. That’s it.
  2. Work every waking minute reminding yourself of your edge and how you trade. If you don’t have that, stop trading until you find it.
  3. Take a break and go do something you know you can do and build that confidence for an hour or two or a day and let those good feelings start to take back over.

Confidence is first, it always comes before success and you usually have to find it before you ever even smell success. You have to own it. And then, when the inevitable happens, have a plan for dealing with it and getting that confidence back. It won’t happen through winning. It will happen before winning.

This is the most dangerous moment in any traders career. Overcompensation comes to the surface and the need to “win to prove something” can easily take over. Hopefully this conversation and glimpse into my week will help someone along the way.

Have a great weekend.





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