Trading Psychology – The Universal Law of Trading Confidence

by cryptheory

March 28, 2025

in Guest Post

Reading Time: 2 mins read

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A trader I work with said to me, “If only I could be more confident, I’d be a good trader.” In response, I asked, “What do you think would make you more confident?” She said, “Making more winning trades.”

Unfortunately, that is the wrong answer. She thinks her results will bring her the confidence she seeks. It is what most aspiring traders think.

Where True Trading Confidence Comes From

Developing enduring confidence in your real-time trading skills and abilities doesn’t come overnight. It’s a process. And, it’s the process of ‘getting there’ that we focus on to improve and to “be a good trader.” Confidence comes from mastering the various skills needed to read the market, execute and manage trades. Mastering these skills and abilities is the process of trading and it is this process that brings about confidence. Confidence really doesn’t come from more winning trades. In fact, more winning trades come from a dedicated focus on the process.

How to Maintain Improvement and Add to Confidence

A key to both building self-confidence and maintaining skills and abilities that you have already developed thus far is to understand how we learn. Although we can certainly learn quickly, learning can’t be rushed. This is especially true with the multifaceted skill sets needed in trading. Far too often I see traders try a strategy or indicator, have a loss or two, and drop that strategy like a hot potato. Again, their focus is on results. This flawed mindset will only frustrate you; lasting improvement and true confidence will always be elusive.

Learning is not linear. It does not happen in a straight line. We don’t start at point A and steadily advance to point B. Instead, learning occurs in a series of ups, downs, and plateaus. It is very much like the swings that occur in an up trend. We experience spurts of growth and development, fall back a bit, advance some more, and then rest a while as we hit a new plateau where what we consolidate what have learned.

Traders with the misguided mindset are thrilled with the ups, get depressed with the downs, and become bored with plateaus. Again, their focus is on results. How can anyone develop genuine confidence on such a roller coaster?

Where Trading Confidence is Really Found

Confidence is found in the learning plateaus where our gains are consolidated and our abilities stabilize. Confidence isn’t found in the ups because that is not our true skill level. The learning hasn’t had time to take hold. The downs of our learning curve aren’t places to become scared or depressed. The downs are to be welcomed. Why? Because this is where we learn what additionally we need to become better. Where else would we get this crucial information? And the plateaus aren’t the place to become bored; they are to be savored.

Gary Dayton, Psy. D.