I am fascinated to watch the Olympic Games. Athletes from all over the world come together and compete with each other. As you might have noticed, sometimes the winner surprises everyone. It is not the one who is most talented or most favored…

I was watching women’s gymnastics. The two top teams were China and the U.S. After the 4^th rotation, it seemed that the U.S. would win the gold medal. However, at the 5^th rotation, one of the gymnasts fell down. She had a low score. Then came the 6^th and final rotation. Even though during the preliminary competition she had scored high in the event, she fell down again and repeated a similar mistake as the previous rotation. The announcers were calling it a tragedy and it put a lot of pressure on the rest of the team. As a result, the teammates made a lot of mistakes. Needless to say, the U.S. finished 2^nd.

What happened? The truth is that all these gymnasts were skilled enough to win the gold medal. However, when it came to the 6^th rotation, they did not have their mental edge. The first gymnast was still thinking about the 5^th rotation and how she fell down. Since her focus was on falling down, she repeated a similar mistake in the 6^th rotation.

As far as the rest of the team was concerned, they felt they really had to carry her. So, instead of focusing on their own game, they were thinking about making up for the mistakes that their teammate had made and they did not perform as well.

What does this have to do with trading?

Have you noticed that, you or someone you know, lets previous trades influence their decision on what to do on the next trade?

When traders lose a few in a row, they start doubting themselves and try different things to prevent their losses. The irony is, as soon as the doubts become stronger, their losses become more frequent.

On the other hand, I hear from lots of traders that they have a winning month, followed by a losing month and they go through these roller coasters. One month up and the next one down.

In the above scenarios, it is not their skill that determines how well they perform. It is their Mental Edge.

So what do you do when you notice these challenges?

1. Be Focused

   The most important thing is to clear your mind and be focused. Because whatever you focus on, gets most of your attention and reaction.

   When a basketball player misses a shot, he/she cannot afford to think about the previous shot. If the player focuses on the missed shot, then that person would lose the next opportunities.

   "When one door closes another door opens; but we often look so long and so regretfully upon the closed door that we do not see the ones which open for us."

   ~ Alexander Graham Bell

2. Be in Tune With the Markets

   Trade the market that you see and not the one that you want.

   Think about the weather. We listen to the weather forecast. However, we know we have to pay attention to what is happening during the day as well. We know that the forecast alone is not enough and unpredictability is part of the game.

   If we don’t pay attention to what is happening in the markets and what influences are at play in that day, we are going to be in a losing game.

3. Be Flexible 

   One size does not fit all. One strategy does not fit all the market conditions. Have contingency plans and don’t be married to a particular position.

   Sometimes what happens is that it becomes more important to bid the market than to make money. It becomes a challenge.

   Do you have occasions when you get into a discussion and you want to win the argument no matter what? You continue it and you might even forget what the original argument was all about? However, for you, the winning becomes the main point…

   The question that I have is: do you prefer to be right at any cost, or make money?

4. Be in a Supportive Environment

   Have a friend or a coach that can be impartial help you get back in the game.

   Going back to the Olympics, Dara Torres who is the oldest woman qualified for a swimming team, had her individual event, her ceremony and only about 5 minutes to get to her next event which was a medley relay. They asked her how she prepared herself so fast for the next event. Her response was that she had 5 coaches surrounding her and helping her to focus.

   So when your trading is not going your way, refocus yourself by using a friend or a coach.

5. Be Patient

   With the Olympics, we only see the end results. We do not see all the practices, both physically and mentally. They have to be prepared.

   When you are comparing yourself with other traders, are you just comparing your results with theirs, or do you look at their routines and what they do to get the results that they want?

   Shawn Johnson had to wait 10 events before she won her gold medal.  She was not feeling well for that event. She was physically and mentally tired. Yet because her coach got her mentally ready, she won the gold medal.

So what are the lessons we learn from the Olympics?

1. Be Focused
2. Be in Tune With the Markets
3. Be Flexible
4. Be in a Supportive Environment
5. Be Patient

Remember, not the most talented or skilled person wins the game. The game is won by the ones who have the Mental Edge.