Featured Article

What Matters Most

Dr. Woody Johnson

I often have mentioned that when you are aiming to master your mental game it is important to support your ability to focus on “what matters most” in the trade.  As we look at this statement, let’s consider the components of “what matters most” in the trade.  Of course, high up on this list would be your ability to identify the order flow.  The imbalance in the order flow is what creates the price action and it is imperative for you to be able to determine when the order flow is going to change or reverse as in a pull-back or a retracement.  The timing of your entry and the target(s) that you choose will hinge upon your accuracy in correctly tracking the order flow.  Careful tracking of the order flow offers the ability to wait for the right moment as the order flow is indicating that a reversal is setting up.  Your mental game must be in order to become aware of mechanical data (the mechanics of the trade); that is, the data of the market, technical analysis and price action and getting the knowledge about supply/demand levels.

Next on the list would be your plan for the trade that has been suggested by the set-up that the order flow reflects.  Some traders choose to have a plan in their heads; I firmly suggest that you actually write your plan out in order to be clear on what you are about to execute and as well to form a road map for exactly how you are going to manage that trade once it is open.  Another point to consider is that the written plan is also the beginning of your Trade Log.  Your Trade Log is the documentation of your mechanical data, which will reflect not only your levels,  price points, what you are basing the entry upon, and time frame to name a few; it also reflects your target and exit.

Of course, what matters most would have to include your rules and ardently following them as you execute your plan.  Having your listed rules near you on your desk in some form is extremely supportive to ensuring that you follow them.  Also, it goes without saying that in order to follow them you must remember them and having a hard copy listed can facilitate this.  Included in your rules would also be your money management and risk management strategy.  Now, for many traders who have years of trading under their belt, the money and risk management strategy is firmly entrenched in their minds.  But, that said, even for those who have been trading for a while it is important and can be very helpful to figure out your risk strategy for the trade before you enter.  Additionally, having your limits for the number of trades and percentages of capital that you have at risk at any particular point is central as well.  This would include your position sizing.  It can be at times a challenge to stay within your size parameters, which can be brought on by greed thereby putting your capital at higher risk.

Things that matter most to the trade will also include your internal data; that is to say, all of your results stem from thoughts, emotions and behaviors; and in order to get the mechanical data results that you want, you must support proactive, positive thinking.  Thinking, which is driven by beliefs, and which initiate emotions, drives behavior and behavior is directly connected to the result that you get.   So, it is crucial that you remain self-aware and monitor your internal data so that you are as closely aligned in body, mind and emotions as possible in order to focus with a laser precision on the “what matters most” in the trade.

These points are just some of what you will want to focus intently upon as you trade.  Trading is an imprecise, performance oriented art.  In order to have consistent success you must always bring and sustain your A-Game at the platform.  With your A-Game firmly entrenched, you are then in a much better position to avoid the herd mentality and thus take advantage of supply/demand rule based trading without being seduced by illusions stemming from limiting beliefs.  It is easy to get caught up in unconscious conversations that are destructive and distressing, which is why you must maintain vigilance in your self-monitoring and be diligent with regard to changing negative thoughts when you have noticed them.  Your trading is serious as your hard earned capital is at risk; make sure that you are bringing your highest and best trader to ensure that you get the results that you want by focusing on “what matters most.”

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.