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The Three D Process: An Important Way to Keep Your Trading On Target

Dr. Woody Johnson

The trader stared at her screen, it was like she had been in a bad dream and had just awakened to find that it was not a dream at all.  She couldn’t believe it.  She had been doing so well…and for weeks now.  But there it was in front of her eyes; one of her largest losses ever.  In fact, she really couldn’t remember when she had lost so much money in a trade.  She felt sick to her stomach, her head ached, and she was shaking.  It all began so well this morning.  She went through her morning routine to get ready for trading by checking the overnight markets, she checked the news, she checked her watch-lists, and then planned her trades.  She looked at the charts she was going to use, identified pivots, supply/demand levels and pinpointed high-probability entries and exits.  All appeared to be in order and then it happened, her first trade went dramatically against her.  Her plan seemed as though it was airtight. How could she have been so wrong?  As the day went on it was more of the same.  Trade after trade…after a while she seemed to be possessed, as if she were in a fog, a bad dream.  It didn’t matter that she had rules and limits that she had set, she just kept entering and entering with violation after violation.  At one point, she remembered looking at a long green candle and thinking, “….this could save my day.”  It didn’t matter that a small voice inside was shouting although barely audible to her saying, “…don’t chase that trade!”  It was too late though, she was caught in a spiral of out-of-control trading…and she knew it, but couldn’t stop herself.  She realized as she placed the oversized position without a stop, that she was setting herself up for disaster; but it didn’t matter, she was barreling forward, full steam ahead going straight for a brick wall.  But just maybe, she hoped, the wall would open up, just maybe this price action would go her way and she would win.  The prospects of this unlikely scenario had intoxicated her thinking as her eyes had become wild with anticipation.  But then the bucket of cold water hit her full in the face as the price action hit a significant supply level and began to plummet.  It fell softly at first, then screamed straight down in a sea of red.  It dropped and dropped and dropped, as her account hemorrhaged from the deep gash that this ill-conceived trade had brought upon her.  The bad part of it was that she couldn’t figure out why it happened…but the worst part of it was that this was not the first time.  How could she do so well and then in one fell swoop, erase weeks of disciplined trading?  She didn’t know what to do because she didn’t understand why it was happening.  She desperately wanted to change but was unwilling or unable to see how.

Our trading friend in the above example, like so many traders was caught in a spiral of issues that were driven by a bad pattern of thinking, believing, negative emotions and inconsistency, and it felt to her like she could do nothing about it.   You can’t change what you can’t face and you can’t face what you don’t know.  You must gain awareness of your unconscious limiting beliefs that drive unconscious conversations, which motivate behavior that is not in your best interest.  The fact of the matter is that you are only aware of a small part of what is going on in your brain/mind.  The largest part of your thinking is out of your awareness, or unconscious.  See, the mind is like an iceberg, the tip is the only part that can be seen above the water line and comparatively speaking it is a very small part of the whole.  The rest of the iceberg is huge and it is below the water line.  Your consciousness is very similar.  Your conscious thoughts are but a small portion of the mind, the overarching part of you that controls all of your involuntary behavior like breathing, heartbeats, cell function, growth, immune system, etc., is the subconscious, totally out of your awareness and so holds much of your thinking and beliefs.  That is how it’s possible to have unconscious conversations with yourself that are driven by unconscious limiting beliefs.  These limiting beliefs, for example, I’m not good enough or I don’t deserve to win; drive unconscious conversations like “… I shouldn’t enter this trade – but I want to because it might go in my direction – and I’ll be right– and I’ll make money– and I’ll feel good.”  You’ve got to root out the limiting beliefs that drive the unconscious conversations by becoming aware of them through self-reflective journaling and introspection, uncovering level by level to find what’s lurking under there.

One of the practices that can help is called the Three “D” Process.  The first D is for Discovery.  After you have identified an issue, like chasing trades; you can ask yourself: a) what emotion am I feeling?  b) When this happens what am I telling myself?  c) What belief is causing this emotion and/or feeling?  After you have identified an answer, don’t stop there, keep inquiring and pulling back layers by posing additional relevant questions. Asking good questions is a valuable routine and a good use of your time as it uses journaling, appreciative inquiry and good personal research.

The next D is for Decide.  Once you have the information about your internal thoughts, emotions and beliefs that are driving behaviors and in turn creating results that you don’t want, it’s time to analyze and decide on tools that could be instrumental in helping you to overcome and resolve these issues.  For instance, there are many reprogramming tools available to you like hypnosis, changing beliefs tool (a Neuro-Linguistic-Programming method), emotional Freedom Technique ( a tool derived from acupuncture that can help you lower and in most cases neutralize emotional tension), and anchoring (another Neuro-Linguistic Programming tool that uses your own powerful experiences to handle errant emotions in the moment).  All of these tools and the people who teach them can be found on the internet or in your bookstore.  Also, OTA teaches these and other tools, techniques and concepts designed to support you in successfully addressing your issues once you have identified them.

The last D is for Design.  Most people live by default; that is, they just allow their thinking and therefore their doing to just happen.  Also, when negative things happen, many people react automatically, which usually means that their behavior is driven by negative thoughts and limiting beliefs.  When you do things automatically from negative thoughts and limiting beliefs, rarely do you get positive results.  It is much more powerful to live and trade by deliberate design.  Trading deliberately means that you identify what you want to accomplish; which in this instance involves personal change and addressing issues, then design your response by considering the tools you have available to you.  Next, make sure that you know how to use the tool.  Then devise a strategy for both the tools and when you will apply them.

Measuring your trading process as with anything where you want to excel, is a requirement; and it can’t be overstated.  There are measurements of Mechanical Data (indicators, price action, time frames, money management and risk management, news, etc.) and as well, you must measure your Internal Data (your thoughts, emotions, limiting beliefs, biases, values and behaviors), both of which must be tracked and managed.  All too often, traders focus most if not all of their efforts on mechanical data and miss the fact that whatever you do begins with what and how you think.  Negative thinking and uncomfortable emotions have a way of throwing monkey wrenches into your trading works.  So, the Three D process is a very important way to keep your trading on target.

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.