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A Moral Compass Will Keep Your Trading on Track

What a year! There have been so many major social, political, environmental, business, economic and financial “upheavals” that you may be feeling a bit anxious. What is also worthy of attention is that the prospect of more of these highly significant and disruptive forces coming in the New Year may be no less distressful.  Because of this it is more important now than ever for you to have a compass to guide you through the myriad challenges that crowd your landscape and obscure your vision as you aim to make decisions that can and will affect you at every level of your life.

The compass that I am referring to is a “principle compass” that will point you to the “true north” of what is in your best mental, emotional, financial and spiritual interests.  In a directional compass, true north or geodetic north points the way to the North Pole and assists in taking you to your geographical destination.  This, also, is a metaphor for your trading as well as overall life by ensuring that you are both going in the direction of and making prudent choices about those things that matter most to your journey as a trader and a human being.  These are interesting times, and it behooves us not only to recognize them but to navigate through them as best we can.  This is more likely to happen if you incorporate principle centered trading as a guiding compass to your efforts.

Principle centered trading is like a compass guiding your path.

A principle is defined in the Cambridge English Dictionary as: “An accepted or professed rule of action or conduct: a person of good moral principles.  2. A guiding sense of the requirements and obligations of right conduct: a person of principle.”

A principle is unchanging and steadfast as a standard of conduct that will always support you in doing and being your best, as in “the law of cause and effect is a principle.” On the other hand, a “value”, which people often think of as the same as a principle, can be transient and idiosyncratic; as in, “do the right thing” because “right” is subjective.”

Principle centered conduct is not a guarantee of things going your way or keeping you from misfortune; but it will support good choices when circumstances and conditions out of your control threaten you.  At these times of turmoil and trauma it’s not what happens to you, it’s what you do about it; and principle centered trading will inform your decisions in the tough situations.

Principle centered trading is about how you can increase overall effectiveness and success by making fundamental changes in your underlying paradigms.  Paradigms are conceptual patterns used to form a mutually exclusive choice or theory.  For example, the scientific method became the basis for expanding knowledge; i.e., to form hypotheses and gather evidence in an experiment aimed at supporting or contradicting a theory.  It became the paradigm of successful science; as opposed to experiments being haphazard and unfocused.

Often haphazard and unfocused actions are driven by fear of loss, especially in trading.  My aim here is to briefly explore principle centered trading as a way to become a consistently successful trader.

Here are a few tenants of Principles Centered Trading:

Seek to be Effective Rather Than Efficient

Being fast or having a strategy that allows you to trade a number of trades simultaneously can create an advantage; but the downsides can hurt you more than the upsides can help.  Instead, establish a routine and a method for all phases of your process that support not only your ability to focus fiercely on what-matter-most, but causes you to consider each step as a deliberate act which engages and optimizes all of your internal and external resources. In other words, be willing to slow down in order to speed up.

Cultivate Gratitude

Gratitude for what you have will support you in a number of essential ways.  When you are genuinely thankful for the cornucopia of good that you enjoy it anchors you to the purpose for which you trade; remember this is where you take the what-matters-most in your life and connect it with the what-matters-most in the trade.  Additionally, gratitude helps you maintain a healthy humility which can keep you from harboring conceit that causes revenge trading, premature exiting, placing inappropriately sized trades and operating out of a need to be right.  So many people, circumstances and conditions have been instrumental in your growth and development … don’t forget them.

Embrace Change As Your Key to Cultivating Curiosity

Stagnation and complacency are the harbingers of mind-numbing mediocrity, whereas curiosity is a strikingly strong harness of energy and resolve.  Cultivating curiosity and approaching change as a constant will help you to maintain flexibility in thought and action.  It causes you to search for different ways to not only approach difficult and complex trades but to do so with your journal firmly in hand. Information is the coin of the universe.

Resolve to Eliminate an Attachment to the Outcome of Any Particular Trade

Free Trading WorkshopEmotional attachment is a death knell to Principle Centered Trading.  When you look to P&L as a scorecard for each trade it drastically shrinks your ability to pay 100% attention to process.  Because it is of paramount importance to have at your disposal all of your wits and mental energy to plan, follow rules, keep commitments and track each trade, it is critical to become detached from the outcome in any particular trade.

The markets are totally unpredictable, and your aim should be to identify the high-probability trade.  You must focus entirely on your process.  Anything short of that will put you at greater risk of being fragmented and makes you susceptible to rule violations and breaking commitments.  So, it is in your best interests to release your fixation on the result and celebrate every instance of complete attention to how you are trading.

These are but a few of the building blocks of developing as a Principle Centered Trader.  This approach to trading will also help you tremendously in navigating many of life’s other issues.  The New Year promises to be quite difficult indeed if it continues to play out as it has in 2017; and there is no evidence to believe that it won’t.

This is just a glimpse of 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.

Joyous Trading,

Dr. Woody Johnson – wjohnson@tradingacademy.com


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.

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