Specialty Skills

Successful Traders Practice

Dr. Woody Johnson

Darla was as frustrated as a grounded kid during a holiday weekend. She looked at the Demand Zone trade that she had taken. It was on the NQ. She had established her levels and the price action had taken a drop-base-drop into a fresh DZ. She even looked at her odds enhancers from which she determined that it was a high probability trade. Her plan called for a 2-tick stop just below the lower line of the DZ on the 5 minute chart that she used to execute on.  Then it happened; the price action inched toward her stop and took her out.  The good news was that she allowed the stop to do its job; but unfortunately when she went back through the plan afterwards, she realized that the stop was too tight.  That was when she understood that it would be supportive if she practiced establishing her zones more carefully, which would include the placement of her stops.

Mastering anything involves learning, incessant practice, and being willing to fail…a lot.  Failure is the secret key to success.  That may sound contradictory on the surface; however, true achievers and champions will tell you that before they enjoyed the sweet smell of consistent victory, they tasted the brew of failure.  Actually, failure is where the most important lessons are learned, and that is where strength, endurance, perseverance and persistence are built.  In other words, you must create consistency in your diligent pursuit of protocols (trading strategies, rules, procedures & set-ups) that are supported by effective routines, which then are tracked through documentation and then repeated to habituate the whole thing…that is skill building.  This skill-building formula for developing your capacity to be better is supported by employing mental and emotional tools to keep you focused on follow-through.  Creating consistency in doing the right things habitually will get you the right results habitually…and that means you’ll enlarge your comfort zone in order to tolerate the negative emotions like anxiety, fear and greed associated with bad trading behavior.  So, like Darla, embrace the realization that you’ve got to practice, practice and practice some more.  But, it’s not just any practice.  In this article, I’m going to share with you a specific kind of practice; a practice that’s not really practice in the normal sense but a step above and if you do it, it will ramp up your learning and your results.

As children, you learned to model effective behavior by observing your environment and using all of your senses to gather information.  From this observation, you began to develop strategies to get the results you wanted and, in many cases, these strategies were developed intuitively.  But the higher and more complicated your objectives, the more important it is that your strategies be conscious in order to optimize the structure.  To do this, you must consistently look for and be receptive to feedback from your environment to: a) Determine what strategies are likely to get the desired result; and b) Modify or change that strategy if you’re not getting the result you aimed for.

One of the ways to increase your chances of modeling or tracking successful behavior is to use a template to lay your modeling structure on.  One way to do that is the Test Operate Test Exit method or TOTE. The principal underlying TOTE is that your behavior is driven or motivated by an outcome.  You recognize when you have achieved the outcome by a unique set of evidence criteria (i.e., what you will see, hear, and feel when you have achieved the outcome, the vision of success).  You are constantly comparing your present state or reality to your desired state or future reality to find out if they match.  When they do match, you know you have reached the exit and have achieved your outcome.  If the present state does not match the desired state, you must complete another operation to discover if that makes a difference.

You are running TOTEs throughout your life comparing where you are with where you want to be, taking actions to bring you closer, and eventually to, the exit itself.  Examples of this in everyday life include:

  • Learning to walk – you try and fail, changing this and that until you are successful
  • Riding a bike
  • Learning to play a game
  • Learning a subject in school
  • Trading

Another example from modeling successful traders is that successful traders keep going until they have reached a successful T.O.T. E match (their desired state of both the trade and their internal focused state match, in other words, they are focused on doing only that which will create consistency in keeping commitments and following rules.  Whereas others—those who do not naturally excel at trading, abandon the T.O.T.E  before they get the match and experience a distinct disconnect between their desired state or trade result as in trading their plan and following rules and the frustration associated with commitment breakdowns.  This may be due to fatigue, anxiety, distraction, distortion, fear, greed or loss of confidence in their ability to follow-through and achieve the outcome.

When I was in college, I knew a guy, Kyle, who was a great basketball player.  He did not begin as a great b-baller.  In fact he did not play much his freshman year.  But everyday he would watch the older, more accomplished players.  He studied the way they moved, the way they practiced, the way they held the ball, the way they dribbled and played defense, the way they hustled, and the way they talked with passion.  He studied how they stretched and how hard they trained.  He saw himself going through practice as if it were a game; moving as they moved.  With every play that he learned, he imagined himself going through all of the steps.  By feeling the leather of the ball, hearing the swish of the nets, feeling how his body felt when he dribbled through the defense for a lay-up or charged the basket for a rebound, seeing the wholeness of the court and sensing a balance of where everyone was, he would feel the passion for playing, the excitement of each step.  By breaking down and “practicing” or T.O.T.E-ing this strategy, he became a great player.

When Kyle became successful from modeling his winning team members’ strategies, he was running a TOTE.  He tried, failed, modified, tried, failed, modified, tried, and so forth.  You get the picture.  He tested, operated and checked for a match in desired outcome (state) vs. outcome (state) attained.  In other words, if the outcomes or states are not equal and do not match, then back to operation #2, and test again. If no match, then operation #3, then test and so on until they MATCH, then exit.

When Kyle’s basketball outcomes, i.e., dribbling, passing, defense, and shooting, all matched the desired outcome, he exited the TOTE for that time, only to be repeated when he identified another level of outcome of state to achieve.  At that point, he would again run the TOTE until he achieved the match.  Furthermore, TOTEs can exist within TOTEs.  For example, dribbling can be a TOTE, passing can be a TOTE, and so forth.  Some TOTEs run every few minutes, some every few hours, days, weeks or years.  Another word in our lexicon for TOTEs is practice; however, it is important to understand the concept of TOTEs because the level of specificity greatly supports the system alignment and effective coding of the successful strategy.  To just say “practice” is to leave much of the process incomplete.  Essentially, the TOTE is a feedback loop designed to prompt you to find what you need to achieve your desired state.  Key skills for successfully navigating the TOTE in order to be able to model are: sensitivity to what is happening, a willingness to learn from feedback, and the flexibility to do or learn something different when what you are doing is not working.

So, as we look at trading it is important to establish T.O.T.E.’s as you breakdown the important subcategories of the strategies that you are using.  These might be for example, establishing levels, planning, execution, rule-set-up and following, identifying targets, etc.  There are many, many examples of trading categories and subcategories that you can identify to run T.O.T.E.’s with.  This is just another of the long list of tools that we teach in Mastering the Mental Game that are designed to support the building of your “A” Game high-rise to create the consistent results that you want in your trading.  Ask your Online Trading Academy representative for more information.  Also, my book, “From Pain to Profit: Secrets of the Peak Performance Trader,” is available on Amazon.com.

Happy Trading.


This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.