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*conscious knowledge of one’s own character, feelings, motives, and desires.

*Having a clear perception of your personality, including strengths, weaknesses, thoughts, beliefs, motivation and emotion.

*It’s about understanding your own needs, desires, failings, habits and everything else that makes you YOU.

*Looking at yourself in the mirror and being honest with yourself about what you see.

Are you self-aware enough to be a consistently profitable trader?

One of our best students reached out to me via email to tell a little story. His broker crashed and it caused him to lose a sizeable amount of money in a trade he was in during the crash. After some arguing, his broker acknowledged the issue and offered him A LOT of free trades to help smooth things over. This trader then asked a question.

“Should I enter ZERO for my commission in my trade tracker while I have free trades?”

My answer was a simple “NO, leave your commissions as they are and just know you have a little extra $$$ in your pocket on each trade”. Your trade tracker/journal isn’t about your P&L and how much money you make. See your broker’s statement for that information. The tracker is all about your process as a Day Trader.

He then wrote this: “I am also aware free trades might affect my trading in ways I do not yet understand (such as cutting winners too early due to being cost effective to take smaller chunk of profit out, or getting into bad trades) but would also like your opinion on that.”

WOW! I said to myself with a HUGE smile on my face. This trader has come so far. To be self-aware enough that he’s concerned that FREE TRADES may mess up his trading! That’s HUGE and a big part of why this trader is doing so well. Most traders would just be giddy with excitement about the free trades and not even realize that they could be a complete disaster for their trading!

Let me explain why FREE TRADES could be a disaster for some traders. Giving free trades to a trader with the wrong mindset is like inviting someone to an open bar. And if you’re a struggling trader, then it’s like inviting an alcoholic to an open bar. Understand an open bar = FREE drinks.

Have you ever been to a wedding or an event with an open bar and see even the most usually calm person act like a freakin’ lunatic? That’s human nature. If someone must pay $8 for a drink, they are somewhat likely to drink responsibly. The responsibility comes from having to decide whether to continue to spend money on drinks. Not to mention they’re constantly aware of exactly how much they drank since they paid for every drink. Do I need REALLY need to spend another $8 for another drink?

However, give someone an open bar with free drinks and even the casual social drinker turns into a raving lunatic for the night! Another drink? WHY NOT! They are FREE after all! How many have I had? Who knows!? Who cares!? They’re FREE! Skoal! Gulp!

You think free trades are any different? They aren’t. They can have the exact same impact on a trader. They can cause a trader to throw all the rules and parameters out the window and just wing it. Why not buy $XYX, it’s FREE! Why not sell some $XYZ up only $.03, it’s FREE! If this happens to you, you’d probably have some great trades and make some decent $$$ for a while. That’s just luck though. Free trades cause you to lose your inhibitions and try new things (just like free drinks). So why not!?!? Like I’ve said before, never confuse luck with a consistently profitable trade strategy.

What happens when the free trades run out and you must get back to trading normally again? What happens when you must start paying for trades again? You just taught yourself a bunch of bad habits. The market was kind enough to let you get away with those bad habits for a while. In fact, the market rewarded you as it encouraged you (just like alcohol) to create those bad habits. Soon, the market will take ALL that $$$ back and then some. Emotionally you just set yourself back months, if not years, in your trading.

So, if you got FREE trades, how would they impact you and your trading? Are you self-aware enough to understand? Please understand I’m using the free trades as one example here. There are countless things you need to be self-aware of to be consistently profitable.

The lack of self-awareness is why I think so many people struggle to be successful at Day Trading. Most people don’t want to be brutally honest with themselves. They don’t want to admit their mistakes. They don’t want to confront their short comings. They don’t want to admit when they’re wrong. The list goes on and on...

I say all the time that Day Trading has taught me more about myself, my mental strengths and weaknesses and my emotions than anything else I’ve ever done professionally. Day Trading can open your mind and be enlightening. However, you must allow that to happen. You must let it in and listen to what it’s trying to tell you. This is where too many traders struggle. They’re just too stubborn or closed minded. They hide from what the market is trying to tell them and simply blame something else. They can’t be brutally honest with themselves so they never deal with the real issues standing in their way.

Basically, they don’t want the truth. The truth stings a bit, or even A LOT at first. The truth stung me. Eventually I embraced it. Then, I changed my mindset, the light bulb went on and I finally figured this out. I’ve been profitable since.

You must let the truth come out if you want to become successful. Letting the truth come out by becoming self-aware is the only way you’re going to break your bad habits. It’s those bad habits that are keeping you from becoming consistently profitable.

The larger point I’m trying to make here is that most traders don’t spend enough time on the emotional and psychological aspects of their trading. They think the reason they aren’t consistently profitable is because they don’t understand some technical aspect of trading. Or they just need more screen time. Or they just haven’t found their edge yet…

Your edge in trading is inside your head. Your edge is not inside some chart pattern. We ALL see the exact same chart patterns. How you train your brain along with your emotions to react is what makes you profitable or not.

How do you find your edge? It all starts with becoming self-aware.

Thanks for reading!

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