Lessons from the Pros

Specialty Skills

It’s About What You Want “Most” in Your Trades

If I asked you to list the things that you want, my bet would be that your list would cover a lot of ground. No doubt, in addition to the many items that would be good for you, if you’re anything like me there would be a number of items that might not be so good for you. For instance, food items on that list might include ice cream, cake, candy or burgers with lots of fries and, let’s not forget, the occasional big gulp. Of course, it doesn’t stop there, you may want to have that extra cocktail, or you may want to drive a little too fast, or sleep in when you have important matters scheduled, or move that stop, exit prematurely or chase that trade. Now, what do all of these things have in common? All of these behaviors, in addition to not being very good for you, leave you feeling better…even if for only a brief period. Granted, some of these behaviors could be considered mild compared to others; that is, until we look a little closer. Sugar, fats and chemicals found in processed foods have been shown to put your health at high risk. Alcohol and its dangers have been well documented. When you get behind the wheel you are driving a weapon and speed kills. Missing important appointments needs no explanation. And, must the dire consequences of trade rule violations be spelled out? Now, before you think that I’m trying to be some kind of killjoy, let me assure you that I’m just as guilty of all of these from time to time and I’m a firm believer in moderation…even moderation. But, this is not my point. The point here has to do with the fact that human wants can vary greatly and they can have competing interests. And, of course there are those who encourage you to go after those things that you want. But, OK, wait for it…it’s not about what you “want” it’s more about what you want “most” as in what-matters-most.

Free WorkshopLet’s face it, it does feel exciting to think that we can avert the perceived “disaster” of a loss by moving or taking out a stop; or that we can jump onto a shooting candle and make a big profit. However, even though the interests involved seem on target; that is, they seem to be about making more profit and making more profit appears to be a good thing; it is, in fact, a sham. The competing interests here actually boil down to short term pleasure (temporary relief) against long term results; that is, protecting capital and creating consistency in implementation, execution and keeping commitments – all high on the what-matters-most list. So, as you identify and clarify those wants keep in mind that the crucial factor lies in what you want “most.” The most list includes personal growth, healthy relationships, integrity, honesty, and to be more specific with trading those behaviors that build capacity for emotional strength and endurance like setting your aim to always be in a position to skill build in your trades.

I had dinner with one of my good friends last night who happens to also be a trader. One of the topics of conversation revolved around the fact that trading, in some respects, involves entropy. Loosely, entropy is a measure of the amount of energy in a physical system not available to do work. The amount of entropy is often thought of as the amount of disorder in a system. Entropy is often used roughly to refer to the breakdown or disorganization of any system: “The committee meeting did nothing but increase the entropy.” (Dictionary.com). So let’s apply this to trading. As a conscientious trader with some years under your belt, you aim to ensure that you are supporting your ability to remain focused on what-matters-most. Additionally, you resolve to stay aligned in body, mind and emotions and to maintain system energy high towards optimal implementation and execution. Then as time goes forward you have 2, 4, 6, maybe even 8 weeks of peak performance trading; but the more time you go on like this the entropy of your system is breaking down your resolve and causing your focus to become disorganized resulting in an increasing fragmentation of your efforts. Then, BAM, that trade happens where you have effectively imploded…and you violate every rule in your book. You can’t help yourself, and end up losing a third of your account. Furthermore, you’ve wiped out all of your gains covering the past eight weeks! You feel like #@!*^%, and you don’t know what happened. The point here is to realize that this condition is not only possible but highly probable. To begin with, you must use your journal and document those thoughts, emotions and behaviors (internal data) and market situations (mechanical data) that led to this event in order to anticipate the future occurrence of the breakdown and successfully address it. By knowing what can bring it on and remaining vigilant and diligent you are able to incorporate mental and emotional tools to combat it. This is paying attention to and embracing what you want “most.” It takes an understanding that our systems never remain constant. Just as we get older and tend to breakdown, it becomes imperative to consistently and constantly do those things that support the system by optimizing our internal and external resources to counter the breakdown and disorganization. For instance, engaging in system supportive behaviors like meditation, visualization, using affirmations, nutrition, and exercise, to name a few, go a long way towards maintaining your edge. These should be activities of daily living (ADL’s) just like bathing, brushing your teeth, and paying your bills; because they support your success.

So, your consistent trading success is not about what you want, but what you want most. Trade in your best interests and aim to stay there. This is what we teach in “Mastering the Mental Game” Online and On-location courses. Ask your Online Trading Academy representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading

Dr. Woody Johnson


DISCLAIMER 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.