Let me start with a question – “Are you trading small?”
Trading small or trading big has nothing to do with the size of your account or your trade size, or any other metrics that could be used to judge your trading actions. The metaphor of trading small or trading big is all about understanding what is driving and motivating your trading actions.
Trading small refers to the part of us that is focused on short term gains, temporary comfort, security, relief, and validation. Trading small usually means cutting our winners short in favour of taking small profits to maintain an illusion of being safe, or control in the moment.
What does it mean to trade big? Trading big means we’re willing to experience short term discomfort, risk, and uncertainty in service of what we truly want — to trade our plan, to stop second guessing our entries, to manage the trade according to our trade plan, and to hold the trades to target.
Trading small means our actions are motivated by our fears, insecurities, a low self worth, and scarcity. Trading small is impulsive, reactive and often frantic.
Trading big means our actions are motivated by what brings us true fulfillment and deep satisfaction. It is slower, focused, committed, and more deliberate.
In my personal experience the distinction between trading small versus trading big is often times a matter of degrees as we all fluctuate between trading small and trading big.
To truly be an outstanding trader it’s important to constantly check in on our motivations and have the understanding of the place in which you’re making your decisions from.
Let’s talk about the 3 key elements to shift from trading small to trading big.
1. Fear is your friend
This is not a judgement of others but simply an observation. If your desire is to have the same outcomes as everyone else then by all means think like the masses. It comes to reason that if you want a different outcome then you must be and think different.
Let’s now extend this to trading. The majority of the time are you trading to win or trading not to lose?
Most of the time –
- Do you micromanage your trades to avoid drawdown?
- Do you cut your winners short just to lock in safe profits?
- Or worst yet to close out winning trades early to avoid being wrong?
These are all symptoms of trading small.
What’s holding all of us back most of the time is fear.
Fear is the biggest obstacle in conquering ourselves but if harnessed properly fear is the ultimate arbiter as it brings a heightened level of awareness, a transcendent level.
The goal then is not about conquering fear but mastering it and using it to your advantage.
Fear can be your friend, but the key is to strategically plan on how to use fear to your benefit.
So spend some time and reflect.
Where can I expose myself to risk, responsibly, to determine what my baseline is?
This type of development reduces anxiety and you can figure out what you need to do to raise the bar.
Do this over and over again and you will find that you can call up fear instantly to perform better not just in trading but in all areas of life.
The most important distinction is that everybody (from the largest hedge fund traders, to world class athletes, to music and stage performers) gets pre-performance anxiety, the difference is that they harness it to their advantage.
So build a practice to harness energy from the butterflies in your stomach but understand the difference between rationalizing fear and letting it flow through you.
“Boxing is a sport of self-control. You must understand Fear so you can manipulate it. Fear is like fire. You can make it work for you: it can warm you in the winter, cook your food when you’re hungry, give you light when you are in the dark, and produce energy. Let it go out of control and it can hurt you, even kill you….Fear is a friend of exceptional people.” – Cus D’Amoto (Head trainer of boxing champions Floyd Patterson and Mike Tyson)
2. Understand your edge
The reality is that most traders are their own worst enemies. Too many traders are too quick to leap into trading the markets before identifying their personal weaknesses and strengths that will drive their trading longevity.
Lost in the shuffle is the realization that your ability to trade big is directly related to having identified your edge and in your ability to develop a precise strategy to perform at that highest level.
Invest the time to fully understand what your edge is and excel in that area. Remember that truly great traders know their edges and are not tempted to go after everything.
Ultimately these lessons need to be manifested in a solid trading plan.
If you’re a new trader, build a trading plan and solid trading routine that you can adhere to well before you go live and begin investing real capital.
When you finally do go live, don’t experiment, just stick with your rituals.
You’ll be tempted to change this and that, but resist the urge as introducing anything new will cause uncertainty, doubt, and fear..
One of the greatest insights that have been imparted on me is to release the need for control.
That is ultimately where we want to be trading from is a position of control, not a place where we feel like we can control or dictate the outcomes but rather a place where we have full control of our trading process.
Trying to control the markets or trying to interpret every tick and spike in a fools attempt to make a discretionary trading decision is a losing game.
This is the trap that most traders fall into, they try to micromanage the details that don’t matter which just causes mental fatigue and burnout.
The key is focus on the 5-10% of the things that can go right, not on the multitude of things that can go wrong.
If you have a trading edge, your job is to take the setup and manage the trade as per your trading plan, period.
Remove the doubt and uncertainty and define your trades to the letter because in the heat of a trade you can’t think yourself through it, you’ve got to get out of your own way and trust your trade plan.
3. Find a Mentor
“Hope is not a strategy”.
Unfortunately in trading many of us are biased to believe more in our ability to win than in our likelihood to fail.
Mentorship is what will stop you from damaging yourself and creating a negative fear based mindset when the going gets tough.
Mentors keep you grounded, in sobriety, and great mentors will let know how things really are.
A great mentor is someone in your corner who will tell you what will happen before they are about to happen.
They can share with you what is reasonable, help manage with self-expectations, and give insights about future inevitabilities as to be prepared.
Finally one characteristic of all high achievers is that are open to suggestion, and they build teams that support them.
The distinction between trading small and trading big is less to do with your account and position size than the mindset which is driving your actions. The key is to do the inner work and regularly check your motivations.
If you can understand that fear can be your compass, and combine that with a solid trading edge and plan, and the support from a mentor who support and challenges then you will be trading from a rarified place reserved for high performers.
Ready to start trading big?