fbpx

Become a Successful Trader

January 19, 2012

6 Simple Ways to Construct A Better Trading Mindset

This post is a little different. Why?

In it, I will talk about how to get control of your finances, reduce your debt, and build financial security. Isn’t this a blog suppose to be about trading you ask? Yes, and by the end of this post you’ll see why it all ties back to improving your trading and trading mindset.

By now, 70% of people have given up on their new year’s resolutions. Why? Because they set a goal that is too large, and didn’t give themselves any smaller goals or milestones to achieve along the way.

How to Get Motivated, Right Now!

Achieving a long-term goal (something that takes longer than a month to complete) can be overwhelming. It all starts with TAKING ACTION! Any action, even the smallest step will propel you forward. Stand up, get off the couch, say to yourself, I can do this and I will do this.

Grab a sheet of paper and start by writing down your goal, then work backwards, listing all the things that need to happen in order to achieve that goal. Each of these steps becomes a milestone, brick by brick they begin to stack up. This will help keep you motivated.

Steps to Building a Financially Secure Lifestyle

Whether you’re 20, 30, 50, or 65 remember it’s never too late to take action and make a change. Here are 6 things you can do immediately (right now, today) that will contribute to your trading success and help you lead a full-filling life.

1. Build Slowly for the Long-Term

One of the best things I ever did was setup a weekly auto-deposit from my checking account into a separate savings account.

Auto-deposits are found to be the single most effective way to build a net worth for retirement. I use the ING Direct Orange Savings Account and Discover Bank Online Savings once is for business one is for personal.

Keep in mind the interest rate is irrelevant. The goal is to set aside money on a weekly basis that you can then use down the road to fund investment opportunities. Start small; you can increase this amount over time. Trust me, you won’t even notice it’s gone, and after a few months you’ll be smiling (and kicking yourself for not stating sooner).

2. The Advantage of Being a Part-time Trader

If you trade part-time, that’s great. Take advantage of the benefit package at your job and (if it’s offered) contribute the maximum to your 401(k). These kind of benefit programs are usually overlooked by most people when applying for jobs. If you’re employer offers matching even better, it’s free money!

3. Adopt a Millionaire Mind

Keep a running list of expenses. Take a look at your bank statements as most online banking tools organize your expenses into categories making this process quick and easy (it may be a little painful though). Are there areas that you could cut back? Maybe a couple less stops at Starbucks or a few more meals at home.

For any potential purchase of $100 or more wait 1 day and ask yourself, do I really need this item? (I use $100 in this example, but adjust that # to one relevant to your spending habits and lifestyle). Many people act rich and spend money frivolously; this is NOT the lifestyle path of true millionaires.

4. Get Rid of Your Cash

If you have lurking credit card balances that’s ok. If you’re paying them down slowly while sitting on cash that’s not okay.

Unless the card has an interest rate of 0.0%, you’re doing yourself a disservice. Say you have a credit card with a balance of $1000 and you have $2000 in cash, I would go ahead and simply pay off the credit card because the interest being tacked on monthly to your balance is greater than what you’re making on your cash.

Paying off small credit balances is a great first step in cleaning the slate and climbing out of debt. Don’t forget to cut up the card once it’s paid off. One or two credit cards is all anyone should need.

5. Turn Compounding Interest In Your Favor

Set it and forget it is not dead. In fact, it’s one of the easiest ways to build your net worth.

Contribute to an IRA on a regular basis. Setup an auto-deposit (like mentioned in step 1) to an IRA account and purchase one or two mutual funds. Continually buy more shares and reinvest the earnings (most funds do this automatically.

Don’t spend a lot of time searching for the perfect fund, a basic asset allocation fund will work (I use Vanguard’s Star Fund – Symbol: VGSTX and Long Term Investment Grade Bond Fund – Symbol: VWESX). Throw some numbers into a compound interest calculator you’ll be amazed at the results.

What is important is that you keep contributing a small amount each week (or month) and do not withdrawal money from the account. Often times what’s so easy to do, is easy NOT to do.

6. Work Less, Earn More

What is your time worth to you? Timothy Ferris explains it perfectly in the 4-Hour Work Week how to work smarter, not harder.

Look for ways to streamline your life and make repetitive tasks more efficient. We are not only compensated in currency, but also in time. If you divide your hours worked into your yearly salary how much are you really making per hour?

Trading is a career that takes massive amounts of time commitment up front, but as the years go by you become compensated with flexibility and time. There’s a saying that goes “Do for a year what others won’t to live for a lifetime as others can’t.”

While it may take more than one year to achieve, the concept remains valid. The 4-Hour Work Week is a great book filled with useful ideas you can implement today to work less and earn more.

Here’s Your First Step…

Identify the top 3 things from this list that you feel would have the biggest impact on your life. Pick one and take action. I suggest opening up an online savings account (as mentioned in #1) and setting up reoccurring weekly deposits. This takes about 10-minutes to do at ING Direct or Discover Bank and you will see the benefits both immediately AND years down the road.

Why These Actions Will Improve Your Trading

Trading is as much about being in the right frame of mind as it is about executing quality trades. Going through this list and taking the steps mentioned will help bring you closer to the mindset that is required to become a successful trader: calm, objective, and without fear of trading scared money.

The goal is not to quit your job to trade full-time, only to become a slave to 16-hour days and a roller coaster of emotional ups and downs. It’s to build financial security, consistent cash flow and in the end, lead to a fulfilling life.

For more trading insights subscribe to the weekly futures trading newsletter!

Get My Top 5 Trading Tools

Join over 10.000 visitors who are receiving a short weekly trading newsletter and learn how to trade for a living. Plus get my top 5 trading tools and 3 free chapters of my Trading Rules eBook.
We hate spam. Your email address will not be sold or shared with anyone.
Trading for Life ,
About Tim Racette
Tim Racette is a day trader of 15+ years in the E-mini futures and swing trader of stocks. Mountain biker, lover of the outdoors, and explorer. Tim is an ASU Sun Devil and a Chicagoland Native now living in sunny Scottsdale, AZ.
5 Comments
  1. What other things help you stay motivated and lead a balanced life?

  2. Good article Tim – Thanks

  3. Tim, this is top notch stuff presented here in this post. Something we all can use whether traders or not.

    As always great work, appreciate it!

  4. Dear Tim,
    I have red your very powerful word, I have learnt a lot of knowledge from this article. All of it is very good but these phrases stood out to me.
    1. I can do this and I will do this.
    2. Many people act rich and spend money frivolously; this is NOT the lifestyle path of true millionaires.
    3. Do for a year what others won’t to live for a lifetime as others can’t
    4. The goal is not to quit your job to trade full-time, only to become a slave to 16-hour days and a roller coaster of emotional ups and downs. It’s to build financial security, consistent cash flow and in the end, lead to a fulfilling life.
    Best regards
    Astad Mistry
    12 year old doing paper trading

  5. Kick-ass advice!

Leave a Reply