Next, there is temporary confidence, which is conditional on recent performance. This is the person whose self-esteem is tied to their account equity or P & L. When on a good run, they feel confident and take larger risks (often the prelude to giving it all back). And when performance is lousy they start grasping at anything, maybe exiting winners prematurely or taking on excessive risk to get their money back.
Finally, we have true confidence. This is confidence that does not depend on recent results. It is based on a deep sense of inner trust. This is the person who has a history of doing the right thing, regardless of the outcome. Doing the right thing in the sense that they act in their own best interest and trust and understand that doing such over time has a positive impact on results. The trust runs deep enough to provide resilience in the face of disappointment. This is true self-confidence, the kind you want in trading and in life.
Almost everyone says that discipline is a requirement to succeed in trading. But most people never talk about what really underlies that type of discipline. The answer……true self-confidence.