Traders Mindset Vs. Investors Mindset

I wanted to talk about the mindset of a trader in this blog because trading is not just about knowing what stocks and options to buy and when to sell but it is also about knowing who you are at the core and what your game plan is.  A trader is different from an investor.  Here is the definition of a trader according to investopedia.com  “An individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.”  I agree with that definition.   A trader looks for momentum, opportunity, a chance to capitalize on probability and statistics with a calculated risk factor.  Every trader must have an investment plan (a reason for why they are trading, the goal, how long will it take to get there, a financial number in mind they need to hit).

Why is this important?  Well if you don’t know which one you are, and you’re confused about your investment plan, then chances are your account is confused and so is your trading and investment style.  You will either stay in trades longer than you are supposed to, sell investments before their time or dive in head over heels into a single trade as if your gambling at a Las Vegas casino hoping to win big.  Both trading and investing can get you to the promise land of financial freedom and neither is better than the other.  The point here is to know which one you are doing, don’t get confused and have a plan.

When you put capital to work know your time frame.  Ask yourself “how long will I be in this trade (a day, week, month, a year)?  What am I expecting out of this trade?  If this trade goes sour will my account survive with enough capital to trade another day?”  These are all important questions to ask if you plan on surviving in this industry.

I myself am a trader; I look for opportunity using technical analysis and you better believe I know the answers to the questions above.  You may find some good investments from my blogs but you will most assuredly find some good trades.  Not all will be winners but to get every trade right 100% of the time, well that would mean you are a trading GOD.  The name of the game is to win; win big and win often.  When you are wrong, which at times you will be, lose small and less frequently.

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