The Psychology

So you want to trade? Here's the most important thing you need for trading. It's not the capital, it's not the right strategy, it's not the plan. It's the Mental Capital. You need a lot of Mental Capital to trade because it's a long arduous journey.

The learning phase is pretty much flat for a long time and sometimes it even angles down for many reasons and one of the reasons is the shortage of Mental Capital. You wake up every day and every day in your life is important. The significance of each day dictates how much mental capital you use or preserve or stack on. A day spent doing nothing drains your energy and a day spent doing something drain your energy. Anything you do or do not, the energy is drained from you. How you spend this energy helps increase or decrease your mental capital.

Firstly, what is mental capital? I will explain this more colloquially. Mental Capital is the ability of a person to make the right choices when all his chips are down and he's beaten down to his knees by life. You might have realized or seen a lot of people around you or on TV saying they couldn't think what to do during a disaster. They froze or they made the wrong choices that lead to disastrous consequences. This is because they lacked the mental capital to make those choices when the pressure was on. Of course, there is another aspect where the experience in life counts but ignoring this for a second.

Let me give you one more example.

Since we are all in India, I am going to assume that whoever is reading this article is a big fan of Cricket. We all love Cricket and I used to love it too. Not a huge fan now but anyway, we know Virat Kohli. Many thousands of successful people on this planet have been successful and extremely fortunate because of many reasons. Hard work, persistence, perseverance, and talent but most of them also have had a defining moment in their life. Like Virat Kohli. For those who aren't aware, Virat Kohli walked out to play for his team the very next day, when his father died. His ability to sustain the pain and use that pain as a motivation defined his career from that point on. If he hadn't had the strength to walk onto the pitch that day, we could assume that he might not have been where he is today because that point when all his chips were down at the time in his life which would define his career, he unaware of how it's going to affect his life, made the choice of his life that lead him straight to the top.

Another example would be when Elon Musk had to decide on shutting SpaceX or Tesla down because he could save only one of the two companies. His decision to split what money he had between the two companies launched both the companies towards an epic success. This was his mental capital to make that decision which in the hindsight was right but was so wrong then. This is Mental Capital. So, you would spend many years learning trading, losing money, straining relationships because you are poor and have nothing to show for yourself. That point in time where you have to decide on going ahead and taking the leap of faith or turning back into the woods where you came from decides what your life is going to be. And the worst thing is, you will with each challenge in life, feel that it is the defining moment and you just got through but the challenges never seem to stop and you continue to slog. So, there is never a way to define which is the defining moment in life. And when the time comes, you need to have enough energy to use that opportunity to build your dream on that, or you may never again get that opportunity or you may end up with the struggles for a really long time. You need to stay equipped for this struggle if you want to trade. You need to keep your mind energized. And how do you do this? By letting go of the little things in life. Do not get into petty fights with friends and family. Let go of things you cannot control and find peace with what has happened. Do not work yourself up over lost opportunities and time. Spend that time working on yourself. Like how you feel hungry or thirsty and you have to drink water and eat some food, even if the world is coming to an end, make exercise and fitness, the basic necessity in life. Because your body knows how to use energy and keeping fit helps your body constantly rejuvenate and feel fresh. If you are lazy, then that drains your body of energy. Your mind is like a rechargeable battery. It discharges and loses the capacity to hold the charge if kept idle but sustains the ability, or in fact, even expands the ability to hold more charge when you go through the discharging and charging cycle. Discharging happens by doing good things that reward your mind. Remember the law of thermodynamics? "Energy can neither be created nor destroyed, it can only be converted from one form to another". How does this apply to us? We are a part of a balance in the universe. We consume 100 calories, we use 100 calories. We use the energy that we consume in the form of food or absorption of sunlight, in different ways. But this energy can be used positively and it can also be turned negative. So there you go. By giving power to things that deprive us of our happiness or peace of mind, we are giving energy to things that are negatively charged. This drains us off our positive energy. Virat losing his father, turned the negative spike of energy within himself into positive energy thus motivating him towards greatnesss.

Motivation coming from significant life incidents carries immense energy and if used the right way, it can keep you going for a really long time. And one last way to preserve yourself is to go through the trading process the right way and do it for the right reason. Believe me when I say this. Until you realize that trading is not about money, it's not about being right, it's not about strategy, it's purely about the process, you won't make it and you will continue to fail. You will continue to fail until the market sheds you off of all your bad habits and wrong reasons and only when you are free of these negative qualities, you will start making progress. The market is like a demon on a mission to rid you off of your ego and greed and fear and all those sorts of things. Once you are free of all these, you are permitted to enjoy the fruits of your suffering. Catharsis is necessary. The only difference being how high will you let it lift you or how low?

Good luck...