The 3 or 4 Ms and Trading Psychology

The 3Ms is widely used in trading circles to describe the 3 key things a trader needs to consider when looking at their trading as a whole.  Namely:

  • Method – Your trading rules and strategies etc
  • Money – Money and Risk Management
  • Mind – Your Mindset when trading or Trading Psychology

You could also argue that there is also a 4th M

  • Me – By Me I mean one’s Self – your health and well being which will directly impact upon one’s ability to concentrate and be in the ‘zone’ when trading and for how long one can sustain such concentration levels.  Perhaps the 4th M is subset of ‘Mind’.

The ‘Mind‘ aspect is often over looked by traders in their quest to be successful.  However, it is ignored at their peril.  It is what separates the truly great traders from the also rans.

By understanding your ‘Mind’ better and learning to control it and recognise when it is not at its best, can have far reaching effects upon one’s trading performance, because your decision making improves significantly.  You become more aware of both what the markets are doing and yourself and how to use that to your advantage and what may be interfering with your decision making process and how to control your emotions.

Routines are good, as is keeping fit, fed and hydrated but the ability to be aware of one’s state of mind is very powerful, as once aware then it can be controlled.  If you would like to know more about Trading Psychology then have a listen to the Podcasts on the Trading Psychology page.

Top Trading Tip:  As well as addressing Method and Money Management, spend some time to harness the power of the Mind and Trading Psychology.  You should see a significant benefit when it comes to your trading results.