When you are in a trade what are you paying attention to? In other words what is motivating you? You may be like so many other traders around the planet in that you trade, and trade, and trade. In fact, you may have daily or trade session targets, but rather than discontinue trading when you hit those daily targets you continue to trade and more times than not end up giving back those gains and as well taking a loss for the day. Now, the logical inference is that if you had a target amount of profit and hit that profit target you should stop trading. So, what compels you to continue? Actually, it could be a number of things like the belief that the trend is going strong and why not stay on the train or feeling “lucky” like this is your day and why not take advantage of it. The underlying reason is quite simple … it has to do with greed. When we look at greed, most of you will recognize the fact that it is so ubiquitous for traders, and that you have experienced it so way too often. However, did you also realize that greed is just the flip side of fear? Greed is simply the fear of not having enough or as much as you want along with the impatience of wanting it all right now.
Trading is ultimately about money. The trader wants to expand his capital. But, here is the paradox…trading is difficult and arguably the most challenging venture on the planet because of the psychological turmoil that is activated in the trader when he enters the trade – the fear of loss, the fear of being wrong, and the fear of failure all distort judgment and distract thinking. The point is that consistently “successful” trading is “not” about making money in any one trade. Consistently successful trading is a process; a process that requires a devotion to preparation, analysis, planning, implementation and execution. Because trading is so difficult, like any similarly arduous endeavor, it requires an activation of all of your resources (internal and external) to bear on the process. You only have a total of 100% of attention to focus on what-matters-most. If you are overly invested in P&L then you are diminishing that valuable percentage of attention in direct proportion to the amount of distortion and distraction caused by the intensity of fear and greed. By “overly invested” I mean that when you are in the trenches of a trade it is not the time to be investing your attention and focus on money because money is not a part of the process, it is a desired outcome. In this perspective, the process is all important and anything else is a distraction. One of the more important points is to be dispassionate about the outcome while you are in the throes of the effort. If you are so intently focused on the result of your process during the process, you are necessarily diminishing your attention and your ability to keep firing on all cylinders as you move toward the desired result.
I have often talked about having a sensory rich vision of what you want to achieve. This is a very powerful tool to connect with the passionate white-hot energy of why you want to be successful as a trader. It is your trading purpose, which ties the what-matters-most in your life to the what-matters-most in the trade. The sensory rich vision is a tool to “refuel your perseverance” at the beginning of your trading session and during those times when your energy and your ability to sustain emotional strength and endurance in the trade are waning. This is when you want to deliver that shot of adrenalin to the system. However, when you are in the game and on the court, this is not the time to stop and drink Gatorade or get a breather or fixate on whether or not you are winning or losing. When you are in the heat of battle, this is the time to engender a fierce focus on what you are thinking, feeling and doing as it relates to the process of trading; which is to continuously be in a position of “skill optimization.”
Skill optimization is when you have consistently nurtured and built your skills; i.e., your abilities, your “chops.” Skill building is one of the only things that you should “always” be focused upon in your trading process. The skill building formula is P + ER + FL + H where P = protocols (strategies, procedures, set-ups and rules); ER = effective routines (making your behavior consistent – erratic behavior diminishes to the point of dissolution); FL = feedback loop (where you measure, verify and document whether or not your protocols and routines are providing the expected hit rate); and H = habituation (taking the entire process and repeating it religiously until it has become unconscious competence). The skill building formula if followed religiously is where you have developed capacity for emotional strength and endurance to do what is in the interest of your highest and best trader each and every time you open a trade. Employing the skill building formula is where you take the process of trading and master it. This is what consistently successful trading is about; that is, process mastery. Trading moment to moment is not about P&L even though it is true that you trade to increase your capital. Process mastery cannot be achieved without the accompanying supportive mindset. Your mindset is the sum total of your thinking (beliefs, values, and internal conversations), your emotions, and your behavior. All three of these variables (T+E+B) are intimately involved in your mindset and your results are direct reflections of your mindset.
So, if you are committed to doing your best in order to make money in your trading process, you must de-focus your attention from the money as you trade and intentionally re-focus on mastering your trading process. This necessarily means that you must develop your mindset. You must become and remain self-aware so that you are able to increase the mindfulness of your thoughts, emotions and behaviors. You must create consistency in your mechanical data (everything that relates to the mechanics of the trade – your preparation, planning and execution); and in your internal data (learning mental and emotional tools to manage your thoughts, emotions and behavior) in order to develop capacity for emotional strength and endurance during the trade. This process is no small task and it takes a willingness to be uncomfortable in order to grow and develop the necessary capacity for emotional and strength and endurance. This is what we teach in the Online Trading Academy “Mastering the Mental Game” Online and On-location courses. Ask your OTA representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”
Dr. Woody Johnson